-3-
Addition to tax
Taxable Year Deficiency Sec. 6651(a)(1)
1994 $7,200 $1,800.00
1995 5,850 1,462.50
1996 1,800 450.00
We decide whether petitioner may deduct the ordinary and
necessary expenses it incurred during the subject years. The
expenses relate to income treated as effectively connected to the
conduct of a trade or business in the United States (effectively
connected income), and petitioner claimed the expenses on its
Federal income tax returns, which it filed before any contact
from respondent. Respondent determined in the notice of
deficiency that section 882(c)(2) precludes petitioner from
deducting its expenses because it did not file its returns
timely. Respondent concedes that the expenses are deductible if
section 882(c)(2) does not include a timely filing requirement.
In Anglo-Am. Direct Tea Trading Co. v. Commissioner,
38 B.T.A. 711 (1938), the Board of Tax Appeals (Board) held that
section 233 of the the Revenue Act of 1928, ch. 852, 45 Stat.
849, and the Revenue Act of 1932, ch. 209, 47 Stat. 230, an
almost verbatim predecessor to section 882(c)(2), did not include
a timely filing requirement.2 In so holding, the Board construed
2 As will be discussed, the relevant text of sec. 882(c)(2),
“in the manner prescribed in subtitle F”, is substantially the
same as the related text of the predecessors to sec. 882(c)(2).
We refer interchangeably to the relevant text of sec. 882(c)(2)
and the related text of its predecessors as the relevant text.
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