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As a nonresident of the Unites States, petitioner's
dividend income received on the mutual fund investment is taxable
under section 871(a)(1)(A) and normally would be taxed on the
basis of the 30-percent withholding tax applicable to nonresident
aliens. The dividend income that petitioner received does not
qualify under section 871(h) as nontaxable U.S. source interest
income received by a nonresident alien.
Generally, we treat facts as they happened, not how they
could or might have happened in the ideal situation for a
taxpayer. See Estate of Legg v. Commissioner, 40 B.T.A. 1074,
1076 (1939), revd. and remanded on another issue 114 F.2d 760
(4th Cir 1940). In 1988 and 1989, in regard to the amounts in
controversy, petitioner received dividend income, not portfolio
debt interest income that would have been nontaxable under
section 871(h). Petitioner failed to file a Form W-8 to notify
the withholding agent of her nonresident alien status, and
petitioner has not presented evidence that proved either that the
deficiency determinations were incorrect or that petitioner
qualifies under section 871(h) for a tax exemption on her
dividend income.
Petitioner's argument that she relied on the mutual fund to
properly invest her $1,015,489 to ensure that she was not taxed
on any income earned on her investment is not persuasive.
Reasonable reliance on an agent may constitute a possible defense
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Last modified: May 25, 2011