New York Guangdong Finance, Inc. - Page 30




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          payments to a foreign corporation.  Petitioner also does not                
          contend that it relied on the informed advice of a competent                
          professional that it did not have to file Forms 1042 and 1042S              
          for the years in issue.  Petitioner argues that the interest paid           
          to GITIC and GXE during the years in issue was exempt and that it           
          relied on the advice of Mr. Wong and other professionals to that            
          effect.                                                                     
               We reject petitioner’s argument for several reasons.  First,           
          it does not appear that the professionals who allegedly advised             
          petitioner did anything to ascertain whether petitioner was                 
          required to file Forms 1042 and 1042S before petitioner filed its           
          original returns for the years in issue.  There is no credible              
          evidence in the record establishing that a competent professional           
          investigated petitioner’s obligation to file Forms 1042 and 1042S           
          before the filing due date for the years in issue or that a                 
          competent professional advised petitioner that it did not have to           
          file the forms.  This lack of evidence contrasts sharply with               
          applicable regulations that clearly and unambiguously require a             
          withholding agent to file Form 1042 for a calendar year, even if            
          otherwise taxable payments are exempt, if the agent is required             
          to file Form 1042S with respect to interest payments made during            
          such year.  Secs. 1.1461-2(b)(1), (c)(1)(ii), Income Tax Regs.17            

               17Sec. 1.1461-2(b)(1), Income Tax Regs., requires a                    
          withholding agent to make an annual return on Form 1042 even if             
                                                             (continued...)           






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