Laidlaw Transportation, Inc. and Subsidiaries - Page 19

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               3.   LIIBV's Tax Status in The Netherlands                             
               LIIBV kept books in The Netherlands in which it recorded its           
          lending and borrowing transactions, investments, capital                    
          contributions, income, and expenses.  LIIBV reported the payments           
          on its loans to Transit, LWSI, and Tree as interest income                  
          subject to The Netherlands' income tax.  LIIBV paid income tax to           
          The Netherlands in 1986, 1987, and 1988.                                    
               LIIBV could claim benefits under the Convention for the                
          Avoidance of Double Taxation, Apr. 29, 1948, U.S.-Netherlands,              
          art. VIII(1), 62 Stat. 1778, for all of the interest paid to it             
          by U.S. persons, including petitioners.                                     
               Neither LTL nor any of the other Laidlaw companies asked to            
          borrow money from any unrelated commercial lenders to replace the           
          money the Laidlaw companies received from LIIBV.  LTL did not               
          guarantee repayment of loans LIIBV made to petitioners or the               
          U.S. companies.  However, LTL guaranteed repayment of loans by              
          commercial lenders to petitioners and the U.S. companies.                   
               4.   LIIBV Cura�ao                                                     
               In October 1987, LIIBV established a branch office in                  
          Cura�ao, Netherlands Antilles (LIIBV Cura�ao), to reduce                    
          Netherlands income tax on the interest payments that LIIBV                  
          received from Transit, LWSI, and Tree.  LIIBV Cura�ao kept a set            
          of its books and records in Netherlands Antilles.                           
               On February 17, 1988, LIIBV Cura�ao hired G.A.F. Schrils               
          (Schrils), a resident of Netherlands Antilles, as its branch                
          manager.  Schrils reported to LIIBV's directors in Amsterdam.               

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