Taiyo Hawaii Company, Ltd. - Page 13

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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.                                              
               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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