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minimum ECNII. On the other hand, those accounts that were
adequate for 1989 were deemed inadequate for years 1988 and 1990
solely on the basis that petitioner's minimum ECNII of
$21,282,045 and $20,749,629 exceeded its actual ECNII of
$18,501,669 and $20,426,754 and not based on the actual
inaccuracies of those accounts. We find that section 842(b)
contravenes the basic premise set forth in Article VII, paragraph
(5) of the Canadian Convention.
In the totality of petitioner's circumstances, we do not
believe that petitioner underreported its actual ECNII during the
years at issue despite whatever deficiencies may exist in using
form 1A to identify the extent to which petitioner's net
investment income was effectively connected.
Section 842(b) has the effect of penalizing petitioner, who
reported income commensurate with its U.S. business but whose
investment performance does not attain the U.S. average in each
year. Such an approach is simply not consistent with either
Article VII, paragraph (2) or (5).
Respondent argues that petitioner's facts are not
representative of the foreign insurance industry in the United
States. Respondent admits that petitioner may be adversely
affected by section 842(b) as written but contends, as a policy
matter, the Court should not find the statute to be inconsistent
with the Canadian Convention merely because one particular
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