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collateral, (2) the Los Angeles and Hong Kong branches of Bangkok
Bank Ltd. and Union Bank and its affiliates Standard Chartered
Bank HK and Standard Chartered Bank, Singapore, will be referred
to collectively as the banks in question, (3) Bangkok Bank LA
branch and Union Bank will be referred to collectively as the
U.S. banks in question, (4) the loans at issue that were, in
form, from the U.S. banks in question to Radcliffe and/or BOT
will be referred to collectively as the Bank loans, (5) the
transactions at issue involving the Bank loans will be referred
to collectively as the Bank transactions, (6) the loan at issue
that was, in form, from Horbury to BOT will be referred to as the
Horbury loan, and (7) the transaction at issue involving the
Horbury loan will be referred to as the Horbury transaction.
Certain exemptions from the tax imposed by section 881(a) on
noneffectively connected interest are provided by the Code, and
we now describe those relevant to these cases.65 As pertinent
here, section 861(a)(1)(A) exempts from that tax noneffectively
connected interest received by a foreign corporation on a deposit
with a person resident in the United States that is carrying on
the banking business by treating that interest as not arising
from sources within the United States.
Section 881(c)(1) generally exempts from the tax imposed by
section 881(a)(1) portfolio interest received by a foreign cor-
65 The tax imposed by sec. 881(a) may also be reduced or elim-
inated by treaty. Sec. 894(a).
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