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