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is derived from the pronoun in the phrase "only so much of them",
which refers to the business profits of the resident carrying on
business through the permanent establishment. Although the
precise meaning of the phrase "business profits of the resident"
may be subject to debate, I believe that it does not include a
notional amount of investment income derived from a formula based
on the domestic asset/liability percentage and the domestic
investment yield as provided in section 842(b).
Minimum ECNII is not income of a type that is subject to
attribution under paragraph 1, and, therefore, the issue as to
whether the method of attribution under section 842(b) is
consistent with the "separate-entity principle" embodied in
paragraph 2 need not be addressed. The majority, however,
focuses its analysis on that particular issue and ultimately
decides for petitioner on the basis that the methodology in
section 842(b) is inconsistent with paragraph 2. The majority
states,
we hold that the disposition of this case turns on
whether the section 842(b)(1) formula prescribes a
minimum amount of ECNII based on the facts as they
relate to petitioner's permanent establishment, by
reference to the establishment's separate accounts
insofar as those accounts represent the facts of the
situation * * *. [Majority op. p. 37.]
The majority concludes, "We are convinced that section 842(b) is
contrary to and inconsistent with Article VII, paragraph (2),
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