- 21 -
arts. 1, 3, 4. Petitioner argues, however, that because GXE is a
wholly owned subsidiary of GITIC, interest paid to GXE is
indirectly paid to GITIC, and therefore such interest should be
exempt from U.S. taxation under the China Agreement. Petitioner
relies on two alternative theories: (1) The GXE loan was, in
substance, a loan from GITIC; and (2) GXE made the loan and
collected interest as an agent of GITIC.
1. Substance Over Form
Petitioner argues that interest paid to GXE should be
treated as interest paid to GITIC because the parties intended
the loans to be from GITIC, regardless of which entity’s name
appeared on the loan agreements. Petitioner contends that the
sharing of corporate officers, directors, and office space by
GITIC and GXE is evidence of corporate informality that led
petitioner to believe it was dealing with GITIC when it entered
into the loan agreement with GXE. Petitioner contends that
GITIC, as the parent corporation, made all of the financing
decisions for GXE, including the decision to lend money to
petitioner. According to petitioner, GITIC used its assets to
fund GXE and enabled GXE to lend money to petitioner. Petitioner
also argues that GITIC guaranteed GXE’s loans and that a director
of GITIC signed the GXE loan agreement, evidencing the parties’
15(...continued)
GXE’s office and its place of incorporation are in Hong Kong.
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Next
Last modified: March 27, 2008