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and GXE as shown in petitioner’s general ledger and the September
8, 1998, letter. The total interest reported on petitioner’s
1996 Form 5472 was $117,232.13 less than the general ledger and
September 8, 1998, letter totals. Petitioner offered no
testimony to explain the discrepancy.
We agree with respondent that petitioner’s 1996 Form 5472
contains admissions that can only be overcome by cogent proof.
See Estate of Hall v. Commissioner, supra at 337-338. Although
the record as to 1996 is not as satisfying as the record with
respect to 1995 (in that the total interest reported on the 1996
Form 5472 does not equal the total interest paid to GXE and GITIC
as shown in the general ledger and the September 8, 1998,
letter), we nevertheless believe and conclude that the total
interest paid to GXE during 1996 is as shown in petitioner’s 1996
general ledger. Petitioner has convincingly established that it
paid only $77,099.91 of interest to GXE during 1996.
Accordingly, we find that only $77,099.91 of the $99,666.39
reported on the 1996 Form 5472 represented interest paid to GXE.
D. Interest Paid on the GXE Loan
Petitioner admits that GXE is incorporated and located in
Hong Kong, a geographical territory that for the relevant period
was not covered by the China Agreement.15 See China Agreement,
15Petitioner did not timely raise any issue regarding GXE’s
residency or the taxability of GXE in China, and the location of
(continued...)
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