- 15 - 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 preparerPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011