- 236 -
determinable annual or periodical' United States source income
that it may receive." In his letter, Mr. Bricker does not
address the issue of whether LTD must file a U.S. income tax
return.
Similarly, Deloitte's workpapers do not address the issue of
whether LTD must file a U.S. income tax return. In its
workpapers for taxable years ended June 30, 1984, 1985, 1986,
1987, and 1989,36 Deloitte refers to section 8 of petitioners'
permanent file to support its conclusion that petitioners have no
U.S. tax liability. That section of the permanent file contained
Mr. Bricker's letter to Deloitte dated December 18, 1984, and a
Deloitte internal memorandum dated August 28, 1985, from R.V.
Valdez to Floyde W. Burnside, Jr., and Glen I. Robinson. R.V.
Valdez writes that Deloitte's tax analysis of LTD in the 1984 and
1985 financial statements is "appropriate" based on a discussion
with Burnside and Robinson and Valdez's own analysis. Deloitte's
financial statements for petitioners conclude that LTD "is not
subject to U.S. federal or state taxes on income as it has no
offices in the United States, no U.S. source income, and no
income effectively connected with the conduct of a U.S. trade or
business."
We are not persuaded that petitioners relied upon Deloitte
for advice as to whether to file a U.S. income tax return. Mr.
36
The workpapers for the audit of the taxable year ended June
30, 1988, do not mention the tax obligations of LTD.
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