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should be treated as separate persons unless one corporate form
is a sham.
Furthermore, if one who performs services in the United
States later remits some of its gross income to a higher tier
corporation, such amounts lose their character as ECI, or
business income from the performance of the services, and
generally would be considered the investment income of the higher
tier parent corporation.10 Although it is true that ESC was a
wholly owned subsidiary of A-Alpha engaged in a U.S. trade or
business, it was doing business under its own name as a separate
and distinct entity. The services performed by ESC did not give
rise to U.S. source business income of A-Alpha. In order for A-
Alpha to be considered as having U.S. source income by virtue of
the performance of services, A-Alpha itself would have to perform
the services through agents or employees of its own.11
Because respondent did not determine that any section 482
adjustments were necessary, respondent also did not determine
that ESC was an instrumentality of A-Alpha, or otherwise
controlled by A-Alpha in a way that would require us to disregard
the corporate form of ESC. In the absence of evidence or an
10 Such investment income may be fixed or determinable,
annual or periodic, depending on the form of payment.
11 If A-Alpha did perform services, it is possible that it
could be considered as carrying on a trade or business in the
United States, and accordingly would not be taxed under sec.
881(a), but rather would fall under sec. 882(a), and be taxed on
its effectively connected income.
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