- 10 -
paying $70 million in principal, $12,075,000 in interest, and a
$1,050,000 call premium to the Euronote holders.
On September 22, 1986, Finance was liquidated. The
distribution of Finance's assets to petitioner was completed
sometime during 1987.
Petitioner timely filed Forms 1042 (U.S. Annual Return of
Income Tax to be Paid at Source) for each of the years at issue.
Petitioner also filed Forms 1042S (Foreign Person's U.S. Source
Income Subject to Withholding) for all the payments reported on
the Forms 1042. The interest payments made by Finance to the
Euronote holders were not reported in petitioner's Forms 1042 and
1042S or on any schedule or statement attached to such returns.
OPINION
Section 871(a)(1) generally imposes a tax on nonresident
aliens of 30 percent of the amount of interest received from
sources within the United States. Section 1441(a) and (b)
generally requires persons who pay such interest to deduct and
withhold a tax equal to 30 percent of the amount thereof.
Section 1461 makes the payor liable for this withholding tax.
Section 894 provides that to the extent required by any
treaty obligation of the United States, income of any kind shall
be exempt from taxation and shall not be included in gross
income. See Tate & Lyle, Inc. v. Commissioner, 103 T.C. 656, 664
(1994). During the tax years at issue, article VIII of the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011