Carter, Ltd., a foreign corporation, operates a sales branch in the United States that constitutes a U.S. trade or business. Rather than return the profits from the sales branch to the foreign home office, Carter invests the profits in certificates of deposit at U.S. banks. Explain whether the interest earned on these CDs is considered effectively connected with Carter's U.S.

Carter, Ltd., a foreign corporation, operates a sales branch in the United States that constitutes a U.S. trade or business. Rather than return the profits from the sales branch to the foreign home office, Carter invests the profits in certificates of deposit at U.S. banks. Explain whether the interest earned on these CDs is considered effectively connected with Carter's U.S. trade or business.

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