-72-
While no committee report makes any mention of such a
requirement, the House and Senate committee reports both note
specifically the “necessity for filing of returns by foreign
corporations in order to secure allowance of deductions”. See
S. Rept. 1622, 83d Cong., 2d Sess., supra at 417; H. Rept. 1337,
83d Cong., 2d Sess., supra at A246. The fact that Congress was
keenly aware of the foreign tax provisions when it enacted the
1954 Code also is seen from its inclusion in that act of section
6091(b)(2). That section allowed the Secretary to move all
appeals of the issue at hand from the Court of Appeals for the
Fourth Circuit, which had decided the issue unfavorably to
respondent, to another circuit of his liking.
Third, as part of the Foreign Investors Tax Act of 1966, we
note the substantial amendments which Congress made to section
882. In relevant part, Congress added a new section 882(d) that,
among other things, allowed a foreign corporation to elect to
treat real property income as if it were effectively connected
income. A stated purpose of this legislation was to promote
foreign investment in real property located in the United States.
As an inducement to such foreign investment, Congress intended to
allow foreigners to deduct their expenses related to those
investments. The disputed regulations work against this intent
in that the regulations deny a foreign corporation the taking of
its expenses upon the filing of an untimely return, with the
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