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connected with the conduct of P's insurance business
within the United States, fails to attribute profits to
P's permanent establishment based on the
establishment's facts. Held, further, sec. 842(b),
I.R.C. fails to attribute profits by the same method
each year. Held, further, pursuant to art. VII(2) of
the Canadian Convention, P is taxable under subch. L,
part I on its income effectively connected with its
conduct of any trade or business within the United
States without regard to sec. 842(b), I.R.C.
Jerome B. Libin, James V. Heffernan, Richard J. Safranek,
and Steven M. Sobell, for petitioner.1
Gary D. Kallevang, Diane D. Helfgott, Charles M. Ruchelman,
Elizabeth U. Karzon, George Soba, and Sharon J. Bomgardner, for
respondent.
HAMBLEN, Judge: Respondent determined deficiencies in
petitioner's Federal income and branch profits tax for the
taxable years 1988, 1989, and 1990, in the amounts of $518,102,
$23,730, and $71,662, respectively.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable years at
issue, and all Rule references are to the Tax Court Rules of
Practices and Procedure. The sole issue for decision is whether
the Convention and Protocols Between the United States and Canada
with Respect to Taxes on Income and Capital, Sept. 26, 1980,
T.I.A.S. No. 11087 (effective August 16, 1984), 1986-2 C.B. 258
1Brief amicus curiae was filed by H. David Rosenbloom and
Daniel B. Rosenbaum for the Government of Canada.
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