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was reenacted throughout the years,6 and carried into current
section 882(c)(2).7
Sections 874(a) and 882(c)(2) are draconian provisions
designed to induce foreign corporations and nonresident alien
individuals to file tax returns. In Blenheim Co. v.
Commissioner, 125 F.2d 906, 909 (4th Cir. 1942), affg. 42 B.T.A.
1248 (1940), the Court of Appeals for the Fourth Circuit
explained:
Indeed, unless a foreign corporation is induced voluntarily
to advise the Commissioner of all of its income attributable
to sources within the United States and of the exact nature
of all deductions from such income, the Commissioner may
never learn even of the corporation's existence, and, in any
event, * * * [the Commissioner] will probably be unable to
determine the correct amount of its taxable income.
The situation is pregnant with possibilities of tax
evasion. In express recognition of this fertile danger to
the orderly administration of the income tax as applied to
foreign corporations, Congress conditioned its grant of
deductions upon the timely filing of true, proper and
complete returns. * * *
While both sections 874(a) and 882(c)(2) are venerable,
there are few cases dealing with these provisions. In fact,
there are no cases dealing squarely with the application of
6 Sec. 233 of the Revenue Act of 1932, 47 Stat. 230,
provided that "A foreign corporation shall receive the benefit of
the deductions and credits allowed to it in this title only by
filing or causing to be filed with the collector a true and
accurate return * * * in the manner prescribed in this title".
7 The language of sec. 882(c)(2) is virtually identical to
the language of sec. 874(a) except that sec. 882(c)(2) uses the
words "foreign corporation" in place of the words "nonresident
alien individual".
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