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transfers to properly reflect income and prevent the avoidance of
the withholding tax. See Central De Gas De Chihuahua, S.A. v.
Commissioner, 102 T.C. 515 (1994).
If the U.S. trade or business is in the form of a branch of
a foreign corporation, earnings and profits of the U.S. trade or
business that are not reinvested in that trade or business are
subject to the 30-percent branch profits tax. Sec. 884; see also
Kuntz & Peroni, U.S. International Taxation, par. C1.05[4][a]
(1995). Although the mechanism of taxing the withdrawn earnings
and profits under section 884 is different from the withholding
tax of section 881(a), the result is the same; namely, that
transfer of profits to a foreign person is subject to 30-percent
withholding. Section 884 was intended to provide parity between
foreign taxpayers doing business in the United States through
branches and domestic subsidiaries. Tax Reform Act of 1986, Pub.
L. 99-514, sec. 1241(a), 100 Stat. 2576; Staff of Joint Comm. on
Taxation, General Explanation of the Tax Reform Act of 1986, at
1036, 1037 (J. Comm. Print 1987).
Generally, if services are performed in the United States,
they give rise to U.S. source income, section 861(a)(3), and
services performed outside the United States give rise to foreign
source income, section 862(a)(3). Income from services is
sourced where the services are performed, without regard to the
location of the payor, the residence of the taxpayer, the place
of contracting, or the place of payment. Sec. 861(a)(3); Dillin
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