Ambase Corporation, f.k.a. The Home Group Inc. - Page 15




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          the remaining $14,700,000 of the consolidated HGI note to City as           
          a return of capital.8  In the case of each distribution by                  
          Finance, City recorded capital contributions to HGI of the                  
          amounts of the consolidated HGI note distributed by Finance.                
          HGI, in turn, recorded the extinguishment of the amounts of the             
          consolidated HGI note transferred by Finance to City.                       
          Tax Reporting of the Transactions                                           
               City filed Forms 1042, U.S. Annual Return of Income Tax To             
          Be Paid at Source, for the taxable years ended December 31, 1979            
          through 1985, attached to which were Forms 1042S, Income Subject            
          to Withholding Under Chapter 3, Internal Revenue Code, for each             
          year reporting gross amounts of income paid to Finance and                  
          claiming a zero-percent rate of withholding tax for such payments           
          based on Forms 1001, Ownership, Exemption, or Reduced Rate                  
          Certificate.                                                                
               Respondent subsequently issued petitioner a statutory notice           
          of deficiency, determining additional amounts of tax required to            
          be withheld by City for the years at issue.                                 
                                       OPINION                                        
               Sections 871(a)(1) and 881(a)(1) generally impose a tax of             
          30 percent on amounts received as interest from sources within              
          the United States by nonresident alien individuals and foreign              



               8 The record does not indicate what was done with the FR               
          notes upon the liquidation of Finance.                                      





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