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look-through treatment to payments from foreign non-
controlled payors. See TD 8412 (1992-1 C.B. 271, 273).
Treasury and the IRS continue to believe that the nature of
the income earned by a foreign non-controlled payor from the
use of the licensed property should not determine whether a
rent or royalty payment constitutes income from the active
conduct of a trade or business of the recipient. [Id.]
The supplementary information accompanying the proposed
regulation strongly supports respondent’s position in the instant
case. Further, we find no support for petitioner’s arguments
contained in the proposed regulations.
C. Analysis
1. Interaction of Code and U.S.-France Treaty Provision
Under the U.S. Constitution, treaties are given equal status
with laws passed by Congress. See U.S. Const., art. VI, sec. 1,
cl. 2. A treaty is to be liberally construed to give effect to
the purpose which animates it. See United States v. Stuart, 489
U.S. 353, 368 (1989); Bacardi Corp. of Am. v. Domenech, 311 U.S.
150, 163 (1940). When a provision of a treaty fairly admits of
two constructions, one restricting, the other enlarging, rights
which may be claimed under it, the more liberal interpretation is
to be preferred. See United States v. Stuart, supra at 368;
Bacardi Corp. of Am. v. Domenech, supra; Samann v. Commissioner,
36 T.C. 1011, 1014-1015 (1961), affd. 313 F.2d 461 (4th Cir.
1963). In construing a treaty, the Court gives the language its
ordinary meaning in the context of the treaty, unless a more
restricted sense is clearly intended. See De Geofroy v. Riggs,
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