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Respondent now argues that the dividend income petitioner
received on her mutual fund investment does not qualify as
nontaxable interest under section 871(h), and -- because it has
now been determined that petitioner was not a U.S. resident --
respondent argues that the dividend income of $8,414 and $106,682
that petitioner received should be treated as taxable U.S. source
income to petitioner and subject to tax at the 30-percent
withholding rate applicable to taxable U.S. source income of
nonresident aliens.
Also, because respondent does not want to assert an
increased deficiency and therefore shift the burden of proof
under Rule 142(a), respondent -- on the dividend income --
asserts only the original tax deficiencies that were determined
to be applicable thereto based on the tax rates applicable to
U.S. residents (namely, the 20-percent backup withholding rate).
Respondent's taxation of petitioner on the dividend income
as a nonresident alien but at the 20-percent U.S. backup
withholding rate (so as to avoid increasing the tax deficiency
attributable to the dividend income) does not constitute a new
issue. The assertion of a new theory which merely clarifies or
develops the original determination without being inconsistent
and without increasing the amount of the deficiency generally
will not be treated as a new issue. Achiro v. Commissioner,
supra at 890.
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Last modified: May 25, 2011