- 171 -
was, in fact, made to BOT in the UB $1,830,000 loan transaction,
we reject respondent's determination that the interest that BOT
paid on that loan was subject to withholding tax.
B. Horbury Transaction
Petitioner argues that the interest paid by BOT that is at
issue in the Horbury transaction is exempt from U.S. taxation
under article VIII(1) of the U.S.-Netherlands treaty (article
VIII(1)). Article VIII(1) provides:
Interest on bonds, notes, debentures, securities,
deposits or any other form of indebtedness (including
interest from mortgages or bonds secured by real prop-
erty) paid to a resident or corporation of one of the
Contracting States shall be exempt from tax by the
other Contracting State.
In advancing his position, petitioner contends that this
Court should create a presumption under rule 301 of the Federal
Rules of Evidence that the interest at issue in the Horbury
transaction is exempt from U.S. taxation under article VIII(1).
To support that contention, petitioner asserts that, under the
circumstances relating to the Horbury transaction that he alleges
are present here, "Probability and notions of social and economic
policy,[126] i.e., the unfairness of applying the conduit doctrine
retroactively nine years after the event, when records are un-
available, justify the creation of a presumption here."
126 Probability and notions of social and economic policy are
two of the factors listed and discussed in 1 Weinstein & Berger,
Weinstein's Evidence, par. 300[02], at 300-7 to 300-8 (1995),
which petitioner cites on brief, that courts have considered in
deciding whether to create a presumption under rule 301 of the
Federal Rules of Evidence.
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