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raising a substance over form argument, the taxpayer must have
‘clean hands’ before he is allowed to present strong proof that
the form chosen does not reflect the true substance of the
transaction.”
Similarly, Coleman v. Commissioner, 87 T.C. 178 (1986),
stands for the proposition that the above principles lose none of
their relevance in an international context. We reasoned
therein:
The fact that the purpose underlying the form of the
transactions between * * * [foreign parties involved in
an equipment leasing transaction, one of which was the
party from whom the U.S. taxpayers derived their
interest in the scheme] was to take advantage of U.K.
rather than U.S. tax laws does not, in our opinion,
provide a sufficient foundation for permitting
petitioners to disavow that form in order to obtain the
benefits of U.S. tax laws. * * * [Id. at 202-203.]
Given the foregoing, we hold that petitioners are bound by
the various representations that these payments constituted
commission or consulting income, rather than dividends. Further,
since the record is devoid of any evidence that the recipients
were residing or working outside the United States during the
years at issue, we decide that the sums must be treated as
compensation for services performed in the United States and,
hence, as U.S. source income. Petitioners are not entitled to
treat the special commissions as foreign source income for
purposes of calculating foreign tax credits.
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