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The 1988 Protocol29 defines “dividends” to include “income
treated as a distribution by the taxation laws of the Contracting
State of which the company making the distribution is a
resident.” 1988 Protocol at Art. IV, amending Art. 9, par. 7 of
the Treaty.
Petitioners contend that the 1988 Protocol does not define
the phrase “actually distributed”. Petitioners contend that
neither the Treaty nor the 1988 Protocol applies here because
Burndy-US did not distribute the amounts which respondent
contends give rise to constructive dividends. We disagree.
Burndy-US distributed $20,881,431 in excess value to FCI in
1993.30
29 1988 Protocol at Art. IV, amending Art. 9, par. 7 of the
Treaty, defines “dividend” as:
income from shares, “jouissance” shares or “jouissance”
rights, mining shares, founders shares or other rights,
not being debt claims, participating in profits, as
well as income treated as a distribution by the
taxation laws of the Contracting State of which the
company making the distribution is a resident.
[Emphasis added.]
30 In light of our conclusion that the Treaty and 1988
Protocol do not bar application of withholding tax, we need not
decide petitioners’ contention that 26 C.F.R. sec.
514.21(a)(3)(i) (2000), French Tax Treaty Regs., is invalid.
That regulation provides that “the gross amount actually
distributed includes amounts constructively received." Id. Sec.
514.21(a)(3)(i), French Tax Treaty Regs., was filed on Jan. 3,
1969, well before the 1988 Protocol. T.D. 6986, 1969-1 C.B. 365,
369, 375.
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