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companies. On its Forms 1120F, U.S. Income Tax Return of a
Foreign Corporation, petitioner reported interest paid by a U.S.
trade or business (branch interest) under section 884(f)(1)(A) to
include the accrued amounts in connection with the funding from
related foreign sources. Petitioner did not withhold any amount
under sections 884(f)(1)(A) and 1442 with respect to the accrued
interest but did withhold with respect to the interest paid to
the unrelated banks. Respondent, following the audit examination
of petitioner, determined that the accrued interest to related
entities did not qualify as branch interest and, instead,
constituted excess interest within the meaning of section
884(f)(1)(B).
After respondent determined that there was an excess
interest tax liability, petitioner attempted to fashion a
solution for relief that would also avoid any additional tax to
petitioner or its parent. The branch tax law contains various
provisions designed to permit alternatives to the tax under
section 884 and to enable a taxpayer to choose which provision of
that section applies. The "relief" provisions include elections
that, for example, would permit shifting the tax burden from
section 884 to section 882(e) as ECI or from excess interest tax
to branch interest withholding (section 884(f)(1)(B) to (A)).
None of the approaches provide the tax relief that petitioner
seeks. Petitioner has also proposed several alternative
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