- 190 -
As to the non-U.S. pooled investments, we conclude that the
interest from such investments is treated as income from sources
without the United States. The Asset Management Account,
Eurodeposits, InverCedes, InverCede2, Liquid Assets, Special
Accounts, Term Deposits, Pace, and MMA II investments consisted
of certificates of deposit and term deposits with non-U.S. banks.
The interest on such investments, therefore, derived from non-
U.S. obligors. Accordingly, we hold that the interest from the
non-U.S. pooled investments is treated as income from sources
without the United States. Sec. 862(a)(1).
(2) Taxation of Interest
As we have stated, supra pp. 171-172, section 871(a)(1)(A)
imposes on a nonresident alien individual and section 881(a)(1)
imposes on a foreign corporation a tax of 30 percent of the
amount of interest that is treated as income from sources within
the United States, if the interest is not effectively connected
income to the recipient. No tax, however, is imposed pursuant to
section 871(a)(1)(A) or section 881(a)(1) on interest on deposits
with persons carrying on the banking business. Secs. 871(i)(1),
881(d).
As to the U.S. pooled investments, we apply an analysis
similar to the one for the pre-1986 Act years, supra pp. 177-178,
and conclude that the U.S. banks that paid interest on LTD’s
pooled investments are "persons carrying on the banking business"
for purposes of section 871(i)(3)(A). Accordingly, we hold that
Page: Previous 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 NextLast modified: May 25, 2011