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record to indicate that GITIC controlled anything about the GXE
loan. In addition, although the sharing of employees can
indicate an agency relationship, companies frequently share
employees. See United States v. Bestfoods, 524 U.S. at 69
(citing Lusk v. Foxmeyer Health Corp., 129 F.3d 773, 779 (5th
Cir. 1997)). Although GITIC and GXE shared the GITIC office
building in Hong Kong, the employees of each company were
segregated.
We conclude that petitioner has failed to prove that GXE was
an agent of GITIC with respect to the GXE loan to petitioner. We
hold that the interest paid to GXE as found in this opinion was
properly subject to withholding tax for the years in issue.
III. Addition to Tax
Section 6651(a)(1) imposes an addition to tax for failure to
file a tax return, in the amount of 5 percent of the tax
liability required to be shown on the return for each month
during which such failure continues, but not exceeding 25 percent
in the aggregate, unless it is shown that such failure is due to
reasonable cause and not due to willful neglect. See United
States v. Boyle, 469 U.S. 241, 245 (1985); Denenburg v. United
States, 920 F.2d 301, 303 (5th Cir. 1991); Harris v.
Commissioner, T.C. Memo. 1998-332.
Petitioner admits, and the record clearly establishes, that
petitioner failed to file Forms 1042 for the years in issue.
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