-73-
result that the foreign corporation is required to pay taxes on
its gross (rather than net) income. We know of no statutory
authority under which any type of taxpayer forfeits an
entitlement to deduct substantiated ordinary and necessary
business expenses simply because the taxpayer files a tax return
untimely. While respondent proffers section 882(c)(2) as such
authority in the case of a foreign corporation, that section does
not explicitly support that proffer.
We also bear in mind the Foreign Investors Tax Act of 1966’s
legislative history, which adds to our understanding that
Congress was then mindful of the interpretations set forth in
Anglo-Am. Direct Tea Trading Co. v. Commissioner, supra, and its
progeny. The House committee report, for example, refers
specifically to “existing law”, states that a foreign corporation
is entitled to benefit from its deductions “by filing a true and
accurate return of its total income”, and makes no mention of a
timely filing requirement. See H. Rept. 1450, 89th Cong., 2d
Sess., supra at 90. The Senate committee report likewise makes
no mention of a timely filing requirement. The Senate committee
report, on the other hand, does state in a manner consistent with
our view that the committee intended for section 882(d) to allow
a foreign corporation to treat its real property income as
effectively connected income in order to deduct its expenses
related to that income. See S. Rept. 1707, 89th Cong., 2d Sess.,
Page: Previous 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 NextLast modified: May 25, 2011