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Romano, a citizen and resident of Colombia, invested $$6$ million in Knickerbocker, a wholly owned U$.$S$.$ corporation. Knickerbocker acquired an apartment building in New York for $$2$ million, purchased $$2$ million of stock in small holdings of publicly traded U$.$S$.$ companies, and invested $$2$ million in a fancy art gallery operated in a rented space on Fifth Avenue that produced no U$.$S$.$ real property income. Although the art gallery has been subject to an annual lease with no right to renewal, it has been operated at the same location since its establishment. After only five years, Knickerbocker was worth $$100$ million and Romano has decided to sell the company's stock. Assume that the property values indicated in each case below represent the maximum values during the five years since Knickerbocker was organized. How much, if any, of Romano's gain on the sale of the Knickerbocker stock for $$100$ million will be subject to U$.$S$.$ income tax in the circumstances described below? Will the capital gains preference in Section $1($h$)$ apply to Romano's taxable gain $($if any$)?$ Does the buyer of the stock have a U$.$S$.$ withholding tax obligation with respect to this stock transaction?

If Knickerbocker were a corporation organized in the Cayman

Islands, in which of the circumstances described in problem $1$

would Romano be subject to U$.$S$.$ income tax on the sale of stock in

the corporation?

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