- 78 -
As we have concluded, supra p. 70, that INC is not an
"independent agent" within the meaning of section 1.864-7(d)(3),
Income Tax Regs., we next examine whether INC is a dependent
agent15 which "has the authority to negotiate and conclude
contracts in the name of the nonresident alien individual or
foreign corporation, and regularly exercises that authority"
within the meaning of section 1.864-7(d)(1)(i), Income Tax Regs.
Petitioners argue that, if INC is deemed to be a dependent agent,
INC is not to be considered regularly to "negotiate and conclude
contracts" on behalf of LTD because INC had, pursuant to its
agreement with LTD, no authority to act for, represent, bind or
obligate LTD "without first obtaining LTD’s consent" and that INC
did not act for, represent, bind, or obligate LTD "without first
obtaining the consent of LTD." Additionally, petitioners contend
that INC did not have the authority to negotiate or to conclude
contracts on LTD’s behalf.
In deciding whether INC had that type of authority, we
examine the agreement governing the relationship between INC and
LTD (Agreement) and the entire record before us. Petitioners
rely upon paragraph 8 of the Agreement, which provides that INC
"shall for all purposes be an independent contractor and not an
agent or employee of * * * [LTD], and * * * [INC] shall have no
15
A dependent agent is equated in the regulations with "an
agent who is not an independent agent, as defined in subparagraph
(3) of this paragraph". Sec. 1.864-7(d)(1)(i), Income Tax Regs.
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