Tony, a nonresident alien, owns and breeds race horses. Tony enters his star horse in the Kentucky Derby, the Preakness Stakes and the Belmont Stakes. Tony's U.S. activities:

are not subject to tax in the U.S. because they do not constitute a permanent establishment.

are not subject to tax in the U.S. because they do not constitute being engaged in a trade or business.

are subject to tax in the U.S. because they constitute being engaged in a trade or business.

result in Tony becoming a resident alien.