The North West Life Assurance Company of Canada - Page 53

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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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