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debt owed by Nihon Intergraph to Intergraph and a reduction to
zero of Nihon Intergraph's third-party loan payable account
(reflecting the fact that the overdraft amount had been paid
off). Nihon Intergraph’s capital account continued to reflect
only Intergraph’s initial capital contribution of �100 million.
On Intergraph’s 1987 yearend financial statement,
Intergraph, in effect, was treated as subrogated to Citibank
Tokyo’s creditor rights with regard to the overdraft amount, and
Intergraph’s transfer of the �823,943,385 into Nihon Intergraph's
checking account to eliminate the overdraft amount was reflected
as an intercompany loan from Intergraph to Nihon Intergraph.
In March of 1988, on Nihon Intergraph’s balance sheet
attached to Intergraph's 1987 Form 5471 filed with respondent
with respect to Nihon Intergraph, Nihon Intergraph’s intercompany
debt to Intergraph in the amount of �823,943,385 ($6,484,169) was
reflected as paid off, and Intergraph's capital investment in
Nihon Intergraph was reflected as increased by the same amount.
For Japanese reporting purposes for 1987, Nihon Intergraph’s
financial statements continued to reflect that Intergraph's
payment of the overdraft amount gave rise to an intercompany debt
to Intergraph.
On petitioner's 1987 consolidated Federal income tax return,
however, petitioner treated the overdraft amount as a loan by
Citibank Tokyo to Intergraph, not as a loan to Nihon Intergraph,
and petitioner treated Intergraph's transfer of the �823,943,385
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