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the failure to deposit timely is due to reasonable cause, and not
to willful neglect. Sec. 6656(a).
The parties advance essentially the same arguments with
respect to respondent's determinations involving the various
additions to tax and penalties. We therefore consider those
determinations and arguments together. Petitioner argues that
the additions to tax and penalties at issue should not be imposed
on Radcliffe or BOT because neither of those corporations had any
reason to expect that the payment of the interest at issue in
these cases was subject to withholding tax. In this connection,
petitioner contends that respondent's determinations against
Radcliffe and BOT involving the Bank transactions resulted from
Rev. Rul. 87-89, 1987-2 C.B. 195, that he alleges set forth the
Service's unprecedented treatment as a conduit of a bank involved
in a back-to-back loan transaction that was otherwise engaged in
commercial banking and that was not controlled by the other
persons involved in that transaction. Petitioner further asserts
on brief that the Horbury loan was made prior to October 15,
1984, and that therefore the interest at issue in the Horbury
transaction is exempt from U.S. taxation under article VIII(1)
146(...continued)
1986, Pub. L. 99-509, 100 Stat. 1951, sets the amount of that
penalty at 10 percent of the amount of the underpayment, and,
under sec. 8001(b) of that Act, that amendment is effective for
amounts assessed after Oct. 21, 1986, the date of its enactment.
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