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having gross income treated as effectively connected
with the conduct of a trade or business in the United
States), for purposes of this subtitle--
(A) any interest paid by such trade or business in
the United States shall be treated as if it were
paid by a domestic corporation, and
(B) to the extent the amount of interest allowable
as a deduction under section 882 in computing the
effectively connected taxable income of such
foreign corporation exceeds the interest described
in subparagraph (A)to the extent that the
allocable interest exceeds the interest described
in subparagraph (A), such foreign corporation
shall be liable for tax under section 881(a) in
the same manner as if such excess were interest
paid to such foreign corporation by a wholly owned
domestic corporation on the last day of such
foreign corporation's taxable year.
To the extent provided by regulations, subparagraph (A)
shall not apply to interest in excess of the amounts
reasonably expected to be allocable interest.
reasonably expected to be deductible under section 882
in computing the effectively connected taxable income
of such foreign corporation. [Emphasized language added
and stricken language removed by the 1996 Act,
effective retroactively to all tax years beginning
after Dec. 31, 1986.]
On the basis of the stricken portions of the above-quoted
statutory language, petitioner argues that the interest had to be
deductible before the excess interest tax could apply.13 The
above-emphasized retroactive amendments effective for the taxable
years in controversy, however, obviate any ambiguity that may
have existed in the language that has been retroactively stricken
13 Most unfortuitously for petitioner, the statute in
question was retroactively amended subsequent to the trial of
this matter and during the briefing pattern of the parties.
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