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the United States, are taxed at 30 percent pursuant to section
881(a), but if sourced from without the United States, are not
subject to U.S. taxation.
1. Background
For purposes of section 882(a)(1), the phrase "trade or
business within the United States" generally includes "the
performance of personal services within the United States at any
time within the taxable year". Sec. 864(b). We believe that
section 1.864-4(c)(5)(i), Income Tax Regs., which determines
whether a foreign corporation is "engaged in the active conduct
of a banking, financing, or similar business in the United
States", provides a useful framework in the instant case for
analyzing whether LTD engaged in trade or business within the
United States. For, if LTD engaged in the active conduct of a
banking, financing, or similar business in the United States,
then, a fortiori, LTD was engaged in trade or business within the
United States.
2. Section 1.864-4(c)(5)(i), Income Tax Regs., Engaged in
a Banking Business Test
Section 1.864-4(c)(5)(i), Income Tax Regs., provides that a
foreign corporation is considered
to be engaged in the active conduct of a banking,
financing, or similar business in the United States if
at some time during the taxable year the taxpayer is
engaged in business in the United States and the
activities of such business consist of any one or more
of the following activities carried on, in whole or in
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