From: Erika Kellerhals Sent: Tuesday, January 25, 2011 3:53 AM To: Jeffrey Epstein Subject: Re: I'm not ignoring you - but you probably also don't want to hear tha= you were in my junk folder : ) sorry. interesting information below o= 881- have to pull legislative history on initial enactment because still=no definition of obligation: Section 881(b) provides exemptions from, or reductions of, withho=ding tax and branch profits tax on certain U.S.- source income received by =orporations organized in U.S. possessions. As one of the conditions for su=h treatment in certain cases, section 881(b)(1)(C) sets forth a "base-=rosion" test requiring that no substantial part of the possessions corpo=ation's income be used to satisfy obligations to "persons" who are n=t bona fide residents of such a possession or of the United States. Sectio= 937(a) provides in relevant part that for purposes of section 881(b), exc=pt as provided in regulations, a "person" is a bona fide resident if t=e person satisfies the requirements of section 937(a). For purposes of the=base-erosion test, §1.881-5T(f)(4)(i) defines a bona fide resident of a =ossession by reference to §1.937-1T, which provides that only a natural =erson, rather than a juridical person, may qualify as a bona fide resident=of a possession. Similarly, §1.881-5T(f)(4)(ii) defines bona fide reside=ts of the United States for purposes of the base-erosion test as including=only certain individuals who are citizens or residents of the United State=. Commentato=s observed that the interaction of these rules in the proposed and tempora=y regulations could result in disqualifying income from the withholding ta= exceptions in any situation where the possessions corporation makes payme=ts to satisfy obligations to persons other than individuals. These comment=tors further noted that many common business arrangements would run afoul =f the base-erosion test if corporations cannot constitute bona fide reside=ts. T