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payments directly to Delcom Financial. Del Netherlands acted as
a mere shell or conduit with respect to the interest payments Del
Commercial made. In substance, Del Commercial received the $14
million loan from Delcom Financial and made the loan payments to
Delcom Financial, a Canadian corporation. Del Commercial
therefore is liable for the withholding taxes determined by
respondent.
Northern Ind. Pub. Serv. Co. v. Commissioner, 105 T.C. 341
(1995), affd. 115 F.3d 506 (7th Cir. 1997), on which Del
Commercial relies, is distinguishable. That case involved a loan
to a U.S. corporation from a foreign subsidiary corporation using
funds obtained from unrelated parties on the Eurobond market. In
the transaction at issue in the instant case, the participation
of Del Netherlands had no purpose other than avoidance of
withholding tax. Even the interest-rate spread that Del
Netherlands was to earn was eliminated in 1992 when the interest
rate of the Royal Bank loan was increased to 1� percent.
Northern Ind. Pub. Serv. Co. provides no support for Del
Commercial.
Under section 6651(a)(1), an addition to tax is imposed for
failure to file a tax return, and under section 6656, an addition
to tax is imposed for failure to timely deposit a tax due in a
Government depository, unless it is shown that such failures were
attributable to reasonable cause and not to willful neglect. Del
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