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The record shows that INC had few clients other than LTD and
LTD’s clients. The services that INC performed were almost
exclusively for LTD, such as bookkeeping, effecting trades in
securities, generating client statements, and effecting currency
exchange transactions. The percentage of INC’s gross revenues
derived from LTD were as follows: 94.1 percent in 1985, 99.1
percent in 1986, 91.8 percent in 1987, 94.0 percent in 1988, and
95.8 percent in 1989. Moreover, the record does not establish
that INC marketed its services to clients on its own. Based on
the record in the instant case, we conclude that INC was not an
"independent agent" within the meaning of section 1.864-7(d)(3),
Income Tax Regs. Consequently, we hold that LTD did not engage
in trading in stocks or securities through an independent agent
within the meaning of section 864(b)(2)(A)(i).
Additionally, section 864(b)(2)(A)(i) applies "only if, at
no time during the taxable year, the taxpayer has an office or
other fixed place of business in the United States through which
or by the direction of which the transactions in stocks or
securities * * * are effected." Sec. 864(b)(2)(C); see sec.
1.864-2(c)(1), Income Tax Regs. Both parties, presuming that
INC's San Antonio office was an office through which or by the
direction of which LTD’s transactions in stocks or securities
were effected, focus their arguments on whether INC's San Antonio
office can be attributed to LTD. Petitioners seek to apply
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