1.USAco is the wholly-owned U.S. subsidiary of FORCo, a foreign corporation.USAco's income statement in millions of dollars, appears as follows:

Income Statement

Gross Profit400

Administrative Expenses300

Interest Expense100

The interest expense of $100 is on a longterm note payable from USAco to FORCo, which is entitled to the benefits of a treaty that exempts interest from withholding tax.

What will the IRS auditor argue when they encounter this taxpayer's facts and circumstances?