- 7 -
for each year in issue.7 The 1994 amended Form 5472 reported
that petitioner obtained an additional $2 million loan from GXE
during 1994.8 The 1995 and 1996 Forms 5472 reported that
petitioner maintained the $4 million loan balance through the end
of 1996. The Forms 5472 also reported that petitioner paid
interest to GXE of $118,052.76, $341,772.49, and $99,666.39, for
1994, 1995, and 1996, respectively.
Petitioner did not file Form 1042 or Form 1042S for any of
the years in issue, on the advice of its president Lawrence Wong
(Mr. Wong). Before joining petitioner, Mr. Wong worked as a
certified public accountant (C.P.A.) and as a financial manager.
Mr. Wong began his career at Arthur Young & Co., an accounting
firm. He then practiced privately for 8 to 10 years in New York
City. After practicing as a C.P.A., Mr. Wong owned and managed a
finance corporation and served as its president from 1980 until
the time of trial. Mr. Wong became a shareholder of petitioner
in 1992 and its president in 1996.
On May 25, 2004, respondent issued a notice of deficiency to
petitioner in which respondent determined that petitioner was
liable for withholding tax deficiencies and additions to tax for
the years in issue. Respondent calculated the deficiencies using
7No paid preparer signed the Forms 1120X.
8The 1994 amended Form 5472 reported a beginning loan
balance of $2 million and an ending loan balance of $4 million.
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