- 31 -
Second, the only evidence petitioner offered regarding the
section 6651(a)(1) addition to tax focused on advice allegedly
given to petitioner about its obligation to withhold U.S. tax on
the interest payments. Petitioner contends that it relied upon
professional advice, both from Mr. Wong and from other
professionals with whom Mr. Wong spoke, to determine whether the
China Agreement exempted its interest payments. However, the
only evidence petitioner introduced to support its argument was
testimony by Mr. Wong that he read the China Agreement and
consulted with unnamed experts regarding the obligation to
withhold tax on interest payments to GXE. This evidence is not
sufficient to establish that petitioner reasonably relied on
professional advice from a person who had full knowledge of the
relevant facts and who conducted the necessary investigation to
reach a reasoned conclusion regarding petitioner’s obligation to
file Forms 1042.
We conclude on the record before us that petitioner has
failed to establish reasonable cause for its failure to file
17(...continued)
no withholding tax is required to be withheld if the withholding
agent is required by sec. 1.1461-2(c)(1), Income Tax Regs., to
file Form 1042S with respect to payments made during the year.
Sec. 1.1461-2(c)(1)(ii), Income Tax Regs., requires every
withholding agent to make an annual information return on Form
1042S of “Amounts upon which tax would have been required to be
withheld * * * but for an exclusion from gross income applicable
under any income tax treaty to which the United States is a
party”.
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Last modified: March 27, 2008