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as petitioner's branch, as reported on petitioner's NAIC form 1A.
H. Computation of Income
During each year at issue, petitioner reported on its
Federal income tax returns its net investment income effectively
connected with the conduct of its business within the United
States, computed pursuant to section 842(a), without regard to
the amount of minimum effectively connected net investment income
computed pursuant to section 842(b)(1). During the years at
issue, petitioner used its NAIC form 1A data to identify to what
extent its net investment income was effectively connected for
purposes of section 842(a).
Upon audit of petitioner's Federal tax returns for the years
1988 through 1990, respondent increased petitioner's income by
the extent petitioner's net investment income computed pursuant
to section 842(b) exceeded its income computed pursuant to
section 842(a):
Income Determined Income Determined Additional
Year Under Sec. 842(a) Under Sec. 842(b) Income
1988 $18,501,669 $21,282,045 $2,780,376
1990 20,426,754 20,749,629 322,875
Respondent did not include an adjustment based on petitioner's
net investment income for 1989. All of the "increases in income
tax" for 1988 and 1990 are attributable to the adjustments of
petitioner's taxable income resulting from the application of
section 842(b).
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