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taxpayer in the ordinary course of the conduct of his trade or
business." The nature of LTD’s trade or business is to provide
Mexican investors with access to non-Mexican financial markets.
The physical facility actually required by LTD in the ordinary
course of the conduct of its trade or business is a place that
can receive investment instructions from clients, effect such
instructions, and maintain records of actions that have been
taken. LTD had no place that received clients’ investment
instructions, effected such instructions, and maintained records
of actions taken, other than the San Antonio office. In sum, we
conclude that LTD had "an office or other fixed place of business
in the United States" within the meaning of section 1.864-7(d),
Income Tax Regs.
Consequently, we hold that LTD’s trading in stocks or
securities fails to qualify for exclusion pursuant to section
864(b)(2)(A)(i) for each of two reasons: (1) The trading in
stocks or securities was not carried out through an "independent"
agent, and (2) LTD had "an office or other fixed place of
business in the United States" through which such transactions
were effected. See sec. 864(b)(2)(C). Accordingly, such trading
activities are taken into account to determine whether LTD was
engaged in "trade or business within the United States" pursuant
to section 864(b).
We turn next to the exclusion allowed to taxpayers trading
for their own account. Section 864(b)(2)(A)(ii) provides that
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