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reported the payments on the wrong line of the returns and, in
some cases, misdescribed them on schedules attached to returns”
should not estop petitioners from prevailing on this point.
Although FIL’s status as a CFC was not previously raised or
relied upon by either party, we believe that the clarification
advocated by respondent is warranted to prevent any confusion.
We shall grant respondent’s motion and supplement our memorandum
opinion to the extent of the above explanation regarding the
treatment of dividends received from a CFC. However, we decline
petitioners’ invitation to alter our original holding that the
special commission payments must be treated as U.S. source
compensation income.
Contrary to petitioners’ averments, we are satisfied that,
regardless of the interpretation to be placed on petitioners’
Form 1116 reporting, the standards governing substance over form
arguments continue to support the result reached in our previous
opinion. At best, we are still faced with a record fraught by
ambiguity and inconsistencies. Moreover, not a single document
contained therein makes any affirmative or explicit
representation that the payments were in the nature of dividends.
To the contrary, and we summarize only briefly here, petitioners’
Forms 1040, U.S. Individual Income Tax Returns, and Schedules B,
Interest and Dividend Income, do not show the special commissions
as dividends. FIL’s financial records designate the payments as
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Last modified: May 25, 2011