New York Guangdong Finance, Inc. - Page 7




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          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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