Inverworld, Inc., et al. - Page 11

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          transactions income (other than the two items of income from the            
          Guadalajara office) was from sources outside the United States.             
          Petitioners bear the burden of proving that the income derived              
          from sources outside the United States, Rule 142(a), and have not           
          met that burden.  Accordingly, we do not reconsider our holding             
          that "the remaining currency exchange transactions income is                
          treated as income from sources within the United States."                   
               Petitioners also argue that the currency exchange                      
          transactions income should not be taxed as effectively connected            
          income pursuant to section 864(c) because INC's role in the                 
          transactions was only as a bookkeeper, not as "a material factor            
          in the realization" of LTD's income.  Petitioners contend that              
          the act of contacting institutions for exchange rates is                    
          mistakenly attributed to INC when in fact that was the role of              
          the promoter in Mexico.                                                     
               Contrary to petitioners' argument, we believe that our prior           
          opinion correctly attributes to INC the act of contacting                   
          institutions for exchange rates.  In our prior opinion, we                  
          concluded that the activities of LTD's trade or business relating           
          to LTD's U.S. source income included "contacting institutions for           
          exchange rates and depositing or withdrawing dollars or pesos."             
          INC was involved in making those contacts on behalf of LTD.  As             
          we stated in our prior opinion, we were addressing the U.S.                 
          source income of both types of currency exchange transactions               
          that LTD performed:  currency swaps and currency transactions.              




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