International Multifoods Corporation and Affiliated Companies - Page 18

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               Respondent has not provided, nor have we found, any reason             
          that would preclude application of the general rule articulated             
          in section 865(a) to the facts in this case.  Applying this                 
          general rule of residence-based sourcing, we hold that the loss             
          realized by petitioner on the sale of its Paty stock constitutes            
          a U.S. source loss for purposes of computing petitioner's foreign           
          tax credit limitation pursuant to section 904(a).7                          

          Decision will be entered                                                    
          under Rule 155.                                                             

               7We emphasize the narrow scope of our decision herein.  Our            
          opinion does not hold that sec. 865 requires that losses realized           
          on the disposition of noninventory personal property must always            
          be sourced at the residence of the seller.  To the contrary, we             
          recognize, and the General Explanation accompanying the enactment           
          of sec. 865 confirms, that exceptions to the general rule of                
          residence-based sourcing may be appropriate to prevent abuse.               
          See Staff of Joint Comm. on Taxation, General Explanation of the            
          Tax Reform Act of 1986, at 923 (J. Comm. Print 1987).                       

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