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transactions as bona fide loans. We can only conclude that they
have not satisfied their burden of showing reasonable cause.
4. Payees’ Failure To Secure Treaty Exemption
Petitioners seek to excuse their failure to withhold and
deposit tax on payments made to the Netherlands Antilles
corporations, Caribbean Films and European Investments, on the
ground that these payments would have been exempt from
withholding under the United States-Netherlands income tax
convention, as applied to the Netherlands Antilles, but for the
fact that the Netherlands Antilles corporations failed to follow
certain procedures for certifying their eligibility for the
exemption. See sec. 1.1441-6(b) and (c), Income Tax Regs.;
Rev. Proc. 79-40, 1979-2 C.B. 504.
There is no evidence, however, that petitioners decided not
to withhold and deposit tax in the belief that the foreign payees
had filed or would file the requisite certificates. On the
contrary, since petitioners also failed to withhold and deposit
tax with respect to payments made to other foreign corporations
that would not have been eligible for an exemption, it is
reasonable to conclude that the availability of an exemption
under the United States-Netherlands income tax convention had
nothing to do with their failure.
5. Subsequent Good Faith Efforts
Finally, petitioners call our attention to their cooperation
with the IRS to uncover the extent of the prior payments and
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