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individual and a foreign corporation. Sec. 1.864-2(c)(2)(iv)(b),
Income Tax Regs. The exception applies, however, "only if the
foreign person at no time during the taxable year has an office
or other fixed place of business in the United States through
which, or by the direction of which, the transaction in stocks or
securities are effected." Id.
Section 864(b)(2)(A)(ii) describes the second type of
foreign person that is ineligible for the exclusion of trading
for one’s own account, to wit:
A corporation (other than a corporation which is, or
but for section 542(c)(7), 542(c)(10), or 543(b)(1)(C),
would be, a personal holding company) the principal
business of which is trading in stocks or securities
for its own account, if its principal office is in the
United States.
Petitioners argue that certain of LTD’s trading activities
are eligible to be excluded pursuant to section 864(b)(2)(A)(ii)
from the determination of whether LTD is engaged in "trade or
business within the United States" pursuant to section 864(b).
Specifically, petitioners argue that the transactions LTD
undertook in its own name qualify for exclusion pursuant to
section 864(b)(2)(A)(ii). Additionally, petitioners contend that
the transactions LTD undertook in its clients' names qualify for
exclusion pursuant to the exception for certain dealers in stocks
or securities provided in section 1.864-2(c)(2)(iv)(b)(2), Income
Tax Regs. Petitioners argue that the foreign corporation
exception to the exclusion does not apply in the instant case
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