Alejandrina De Aycardi - Page 4

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          received on her mutual fund investment qualifies as exempt from             
          U.S. tax.                                                                   

               Generally, section 871(a)(1)(A) imposes a 30-percent                   
          withholding tax on certain income received by nonresident aliens            
          from sources within the United States.  Section 871(h), however,            
          treats portfolio debt interest as nontaxable and not subject to             
          the 30-percent withholding tax under section 871(a)(1)(A).                  
          Dividends received, however, are not eligible for this nontaxable           
          treatment under section 871(h).                                             
               Exemptions, exclusions, and other provisions treating income           
          as nontaxable occur as a matter of legislative grace and should             
          remain strictly construed.  Helvering v. Northwest Steel Rolling            
          Mills, Inc., 311 U.S. 46, 49 (1940); Erie Endowment v. United               
          States, 316 F.2d 151, 153 (3d Cir. 1963).  A taxpayer is entitled           
          to an exclusion only if there is clear provision for the                    
          favorable tax treatment.  Templeton v. Commissioner, 719 F.2d               
          1408, 1411 (7th Cir. 1983), affg. James v. Commissioner, T.C.               
          Memo. 1982-456.                                                             
               Reasonable reliance on an agent may constitute a defense to            
          penalties but not to the underlying tax liability.  United States           
          v. Boyle, 469 U.S. 241, 252 (1985).                                         
               Generally, taxpayers bear the burden of proving by a                   
          preponderance of the evidence that respondent's determinations              

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