- 27 -
and (2), (c)(2), Income Tax Regs. Further, payments of interest
that are effectively connected income may be deducted on the
accrual method if the foreign payee uses the accrual method,
again without regard to the residence of the owners of the payor.
Sec. 1.267(a)-3(c)(1) and (2), Income Tax Regs. Thus, if a U.S.
corporation is making a payment of interest to a related foreign
person, the accounting method for deducting the amount depends on
whether the interest is or is not effectively connected income,
and on whether the payee uses the accrual method, not on the
residence of the owners of the U.S. corporation. See also sec.
1.267(a)-3(c)(4), Income Tax Regs. (amounts owed to controlled
foreign corporation and similar enterprises are deductible on the
accrual method if the enterprise uses the accrual method). In
sum, there is nothing in the regulation in issue that subjects
petitioner to other or more burdensome taxation. Thus, there is
no violation of Article 24(3).
Conclusion
We conclude that section 1.267(a)-3, Income Tax Regs., is a
valid exercise of the regulatory authority granted in section
267(a)(3) and does not violate Article 24(3) of the 1967 Treaty.
To the extent any other arguments of the parties are not
addressed, they are moot, irrelevant, or meritless.
To reflect the foregoing,
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011