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that Dr. Ballentine's testimony should be excluded because
it amounts to impermissible advocacy.
Respondent also proffered the testimony of an expert
witness but did so only to preserve the Commissioner's
right to offer such testimony if the testimony of
petitioner's expert were admitted into evidence. At trial,
the Court permitted both experts to testify and reserved
ruling on respondent's motion in limine.
Petitioner offers the testimony of Dr. Ballentine to
"assist the Court in interpreting the economic terms in
section 1.861-8(e)(2)", Income Tax Regs. According to his
report, Dr. Ballentine reached two overall conclusions:
(1) "Netting interest income against interest expense
implements the economic concept of the fungibility of money
as it relates to sources of funds"; (2) "interest netting
achieves a tax neutrality between borrowing and reducing
cash balances as sources of funds." Petitioner argues
the same two principles in the posttrial briefs filed on
its behalf. Dr. Ballentine's report states that he was
retained "to provide an economic evaluation of netting
interest income against interest expense for purposes of
the tax rules that apportion interest expense between
domestic and foreign source income."
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