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and separate person" dealing wholly independently with the
foreign entity. (Emphasis added.)
Use of the words "attributable" and "attributed" connote
going beyond the actual profits earned and reported by the
permanent establishment. Attribute means "To assign to a cause
or source". Webster's II New Riverside University Dictionary 137
(1984). For example, the "attribution" rules of section 267(c)
assign ownership of stock to persons other than the actual
owners. The profits to be attributed are those "which it [U.S.
business] might be expected to make if" it were a separate person
engaged in the same or similar activities and dealing
independently. The words "might be expected to make" obviously
mean something other than "actually made". "Might" means a
"condition or state contrary to fact", Webster's II New Riverside
University Dictionary 751 (1984); "expected" means something that
probably could or would have been; and the word "if" refers to
conditions other than those that actually occurred (i.e., if the
U.S. business were a distinct and separate person dealing
independently). Thus, the Treaty must be read in a manner that
allows the attribution of profits to the U.S. business
establishment in an amount that is at variance with the actual
profits reported by the U.S. business. Any other interpretation
makes the aforementioned Treaty provisions redundant.
The Model Commentaries to article VII, paragraph (2) support
this interpretation. They provide:
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