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Are the Ginter and Gomes Properties To Be Included in the
Computation of the Excess Interest Tax?--Next, petitioner
contends that the related-party debt and resulting interest
connected with the Ginter and Gomes properties should not be
included in the base used to compute the excess interest tax.
Petitioner's argument concerns the computation of the excess
interest tax provided by section 884(f)(1)(B). Under those
provisions, excess interest is computed by subtracting interest
paid by the U.S. branch (branch interest) from the amount of
interest allocable to ECI under section 1.882-5, Income Tax Regs.
Section 1.882-5, Income Tax Regs., provides a three-step process
for determining the amount of interest allocable to ECI. The
first step determines which assets are U.S. connected by
ascertaining which assets generate ECI from the conduct of a
trade or business in the United States. Sec. 1.882-5(b)(1),
16(...continued)
situated domestic corporation. In addition, petitioner contends
that sec. 1.884-1(e)(3), Income Tax Regs., violates the
nondiscrimination clause. Petitioner has not made any specific
arguments showing any particular discrimination. For example,
petitioner has not shown or argued that there was no income
against which "excess interest" could be applied or that the tax
on excess interest exceeds petitioner's potential tax benefit
from ECI. Petitioner, using the discrimination argument as a
stalking horse, contends that by providing a taxpayer with the
ability to reduce its U.S.-connected liabilities under sec.
1.884-1(e)(3), Income Tax Regs., without any limitation, there
would be no conflict with the nondiscrimination clause herein.
In general terms, petitioner's loosely formulated discrimination
argument is contrary to the purposes underlying sec. 884 and
without specificity or support.
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