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party banks. Without the advances, petitioner would not have
been able to conduct its real estate development activities as
well as maintaining and holding the Ginter and Gomes properties
from 1988 through 1991.
Petitioner did not elect under section 882(d) to treat any
of its income from real estate activity as effectively connected
with a U.S. trade or business.
OPINION
The primary controversy concerns whether petitioner is
liable for the excess interest tax pursuant to section
884(f)(1)(B).4 Section 884, here considered by this Court for
the first time, was enacted to create parity between foreign
corporations that choose to operate in branch form and those that
choose to operate through a domestic subsidiary in the United
States.5 See H. Conf. Rept. 99-841 (Vol. II), at II-646 to II-
647 (1986), 1986-3 C.B. (Vol. 4) 1, 647-648; Staff of Joint Comm.
4 This subsection is part of the statutory provisions
referred to as the branch tax regime.
5 Although included in subsec. (f) of sec. 884, the branch
tax regime is a self-contained group of provisions intended to
achieve parity between branch operations and domestic
subsidiaries of foreign corporations. The application of these
provisions is complicated due to their complexity, lack of
specific definitions, and reliance on Internal Revenue Code
concepts that do not necessarily comport with the sec. 884
structure. Artificial bases are used to reach parity, and
certain distinctions made in other portions of income taxation
are ignored for purposes of the branch tax laws. These
attributes have made our analysis more difficult.
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