New York Guangdong Finance, Inc. - Page 31




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          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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