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current OECD model convention, is a means “to ensure equal
treatment for taxpayers residing in the same State.” I Model Tax
Convention On Income and On Capital, Article 24, par. 5, 57 (OECD
Nov. 1977). Petitioner is a domestic corporation, and the tax
treatment of its foreign source royalty income is determined in
exactly the same manner as for any other domestic corporation
receiving royalty income from a noncontrolled foreign
corporation. Petitioner has received equal treatment with all
other similarly situated taxpayers residing in the United States.
The fact that petitioner’s ultimate parent is a French
corporation plays no part in determining the characterization of
petitioner’s royalty income. Consequently, we do not find any
basis for petitioner’s assertion that respondent’s alleged
failure to characterize petitioner’s royalty income as section
904(d)(1)(I) general limitation income contravenes Article 24(3)
of the U.S.-France Treaty.
2. The “Reserved” Paragraph and Treasury Representations
For convenience, we will examine petitioner’s second and
third arguments together. Petitioner’s reliance on the
“reserved” paragraph in section 1.904-5(i)(3), Income Tax Regs.,
is also misplaced. In Connecticut Gen. Life Ins. Co. v.
Commissioner, 109 T.C. 100, 110 (1997), affd. 177 F.3d 136 (3d
Cir. 1999), we held in similar circumstances that a reserved
paragraph in a regulation “simply reserves a space for
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Last modified: May 25, 2011