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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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