New York Guangdong Finance, Inc. - Page 19




                                       - 19 -                                         
          conclude that GXE made its loan to petitioner as GITIC’s agent or           
          that the GXE loan in substance was a loan from GITIC, we shall              
          sustain respondent’s determination with respect to 1994.                    
                         (b) 1995                                                     
               The record convincingly establishes that petitioner                    
          erroneously reported interest paid with respect to both the GITIC           
          and GXE loans as interest paid to GXE on its 1995 Form 5472.                
          Petitioner’s 1995 general ledger and the September 8, 1998,                 
          letter confirm that petitioner paid interest of $164,762.08 on              
          the GXE loan and $177,010.41 on the GITIC loan in 1995.                     
          Petitioner reported the sum of these amounts on its 1995 Form               
          5472.  Accordingly, we find that $177,010.41 of the $341,772.49             
          reported on the 1995 Form 5472 was paid on the GITIC loan and was           
          not subject to U.S. taxation under the China Agreement.                     
                         (c) 1996                                                     
               The record regarding petitioner’s 1996 interest payments               
          supports a finding that on its 1996 Form 5472, petitioner                   
          erroneously reported interest paid with respect to both the GITIC           
          and GXE loans as interest paid to GXE.  Petitioner’s 1996 general           
          ledger and the September 8, 1998, letter are consistent with each           
          other and reflect that petitioner paid interest of $77,099.91 on            
          the GXE loan and $139,798.61 on the GITIC loan in 1996.  However,           
          the total interest reported on Form 5472 attached to petitioner’s           
          1996 Form 1120X did not match the total interest paid to GITIC              







Page:  Previous  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next 

Last modified: March 27, 2008