-5-
it files a timely return. Under the relevant part of the
disputed regulations, a return is timely if it is filed before an
arbitrary 18-month deadline (18-month deadline) devised by the
Secretary.4 The Secretary issued the disputed regulations
stating that section 882(c)(2) contains a “clear” requirement
that a foreign corporation file its return timely in order to
deduct its expenses. The Secretary made no mention of the
consistent interpretation of the relevant text by the Court of
4 The regulations explain the 18-month deadline as follows:
For taxable years of a foreign corporation ending after
July 31, 1990, whether a return for the current taxable
year has been filed on a timely basis is dependent upon
whether the foreign corporation filed a return for the
taxable year immediately preceding the current taxable
year. If a return was filed for that immediately
preceding taxable year, or if the current taxable year
is the first taxable year of the foreign corporation
for which a return is required to be filed, the
required return for the current taxable year must be
filed within 18 months of the due date as set forth in
section 6072 and the regulations under that section,
for filing the return for the current taxable year. If
no return for the taxable year immediately preceding
the current taxable year has been filed, the required
return for the current taxable year (other than the
first taxable year of the foreign corporation for which
a return is required to be filed) must have been filed
no later than the earlier of the date which is 18
months after the due date, as set forth in section
6072, for filing the return for the current taxable
year or the date the Internal Revenue Service mails a
notice to the foreign corporation advising the
corporation that the current year tax return has not
been filed and that no deductions (other than that
allowed under section 170) or credits (other than those
allowed under sections 33, 34 and 852(b)(3)(D)(ii)) may
be claimed by the taxpayer. [Sec. 1.882-4(a)(3)(i),
Income Tax Regs.]
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