Unionbancal Corporation - Page 7

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         on the loan portfolio’s having a United Kingdom tax basis of                 
         $422,985,520.  In examining Standard Chartered-U.K.'s tax returns            
         for 1984 and certain subsequent years, the United Kingdom Inland             
         Revenue determined that Standard Chartered-U.K.’s tax basis in               
         the loan portfolio was overstated and consequently that its                  
         allowable losses therefrom should be reduced for United Kingdom              
         income tax purposes.                                                         
              In 1996, petitioner requested competent authority assistance            
         to resolve the value of the loan portfolio on December 31, 1984,             
         the amount of the loss realized on that date upon the sale of the            
         loan portfolio, and the proper treatment of the loss realized.               
         The United States Competent Authority and the United Kingdom                 
         Competent Authority agreed that the value of the loan portfolio              
         on December 31, 1984, was $346,630,214 and that petitioner’s loss            
         on the sale was $87,927,200.  The competent authorities were                 
         unable, however, to resolve the tax treatment of this loss.  The             
         United States would not withdraw its adjustment disallowing the              
         loss to petitioner.  In addition, the United Kingdom would not               
         allow Standard Chartered-U.K. to increase its basis in the loan              
         portfolio to reflect the loss disallowed petitioner for U.S.                 
         income tax purposes.                                                         
              Petitioner has not returned to Standard Chartered-U.K. the              
         excess of the amount received from it for the loan portfolio over            

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