- 8 -
promulgated new final regulations which omitted the reserved
paragraph. The preamble to the new final regulations states that
the Commissioner had decided not to adopt rules which look
through payments from foreign parents to U.S. subsidiaries
because of administrative and policy concerns. The preamble
states:
To apply the look-through rules, the Service needs
complete information concerning the foreign
corporation’s income and expenses. The Service may not
be able to obtain all of the necessary information from
a foreign parent corporation and to audit it. In
addition, the payments generally would be deductible
from taxable income of the payor that is entirely
outside the jurisdiction of the United States
(including subpart F) and, therefore, do not give rise
to the same concerns involved in other look-through
cases. [T.D. 8412, 1992-1 C.B. 273 (preamble to the
1992 final regulations).]
Petitioner further relies on the U.S.-France Treaty and more
specifically the nondiscrimination provision embodied in Article
24(3), which provides:
A corporation of a Contracting State, the capital of
which is wholly or partly owned or controlled, directly
or indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first-
mentioned Contracting State to any taxation or any
requirement connected therewith which is other or more
burdensome than the taxation and connected requirements
to which a corporation of that first-mentioned
Contracting State carrying on the same activities, the
capital of which is wholly owned by one or more
residents of that first-mentioned State, is or may be
subjected.
Unless there is a reason to disregard the general rule of
section 904(d), petitioner’s royalties from L’Air should be
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011