Jacob and Chana Pinson, et al. - Page 15




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          limitation income is not in and of itself inconsistent with the             
          payments’ being in the nature of dividends, suggesting that such            
          clarification “would prevent any misunderstanding of the relevant           
          authorities by the general public.”                                         
               Respondent points out that FIL appears to be a controlled              
          foreign corporation (CFC), as defined in section 957, and                   
          therefore would be subject to the “look-thru” rules of section              
          904(d)(3).  Pursuant to that section, dividends received by U.S.            
          shareholders of a CFC would typically be characterized pro rata             
          in accordance with the nature of the various types (if more than            
          one) of the underlying income of the CFC.  See sec. 904(d)(3)(D);           
          see also sec. 1.904-5(c)(4), Income Tax Regs.  Hence, dividends             
          from a CFC may in many cases properly be categorized as general             
          limitation income rather than as passive income.                            
               Petitioners join in respondent’s motion and further urge the           
          Court to reconsider and hold (1) that petitioners are not                   
          precluded from arguing substance over form with respect to the              
          special commissions, and (2) that petitioners have met their                
          burden of showing the payments to be dividends in substance.                
          (Petitioners do not dispute for purposes of this motion that the            
          payments made to the partnership were taxable as compensation for           
          services.)  Petitioners argue that in light of the now-conceded             
          consistency of their Form 1116 reporting with their foreign                 
          source dividends assertion, the “fact that the return preparer              






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