c16-17 - foreign office of a U.S. bank or other financial...

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C:16-17 During the current year, Manuel, a nonresident alien, conducts a U.S. business. He earns $100,000 in sales commissions and $25,000 of interest income. What factor(s) do U.S. taxing authorities consider to determine whether the interest is investment income not subject to U.S. taxation or business income subject to U.S. taxation? U.S. tax authorities consider the following factors in determining whether the interest is investment income not subject to U.S. taxation: (1) the interest is not effectively connected with the conduct of a U.S. trade or business and (2) is it (a) earned on deposits in a U.S. bank or
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Unformatted text preview: foreign office of a U.S. bank or other financial institution or (b) portfolio interest earned on registered or unregistered obligations issued by U.S. taxpayers? They consider the following factors in determining whether the interest is business income subject to U.S. taxation: (1) was the interest generated by an asset held or used in the conduct of a U.S. trade or business (i.e., asset-use test) or (2) are the taxpayer's activities a material factor in the realization of the interest income (i.e., business activities test)?...
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