- 150 - July 31, 1986, and July 31, 1987, reported income effectively connected with a trade or business in the United States. Eurotor's Federal tax return for the fiscal year ended July 31, 1988, was marked "Final Return" and contained the following statement: Eurator S.A. (98-0063013) is not effectively connected with the conduct of a trade or business accordingly, Eurator S.A. is not required to file a U.S. income tax return of a foreign corporation (Form 1120F). The return did not report any effectively connected income for 1988, and there is no evidence that a 1989 return was filed. Therefore, to the extent that Eurotor reported the management and consulting fees on its 1987 Federal tax return, petitioners are entitled to the exemption from withholding. For 1988 and 1989, petitioners are not entitled to the exemption from withholding because the management services were U.S. source income and there was no effectively connected income included in the gross income of the recipient. E. Guarantee Fees Paid to Dapy and Roundabout in Connection With the Commercial Paper Transactions Petitioners argue that the guarantee fees were not specifically sourced under section 861 or 862 and urge the Court to characterize the payments as for services or to adopt an insurance premium analogy. Respondent contends that, to the extent the Court concludes that the payments are dividends, the payments are subject to withholding. We concluded earlier that the payments underlyingPage: Previous 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 Next
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