Northern Ind. Pub. Serv. Co. v. Commissioner
United States Tax Court
P, a domestic utility company, formed F as a subsidiary corporation in the Netherlands Antilles. F's only activity was to borrow money by issuing Euronotes and then lend the proceeds to P at an interest rate that was 1 percent greater than the rate on the Euronotes. Sec. 1441, I.R.C., generally requires a domestic taxpayer to withhold a 30-percent tax on interest paid to nonresident aliens.
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P, a domestic utility company, formed F as a subsidiary corporation in the Netherlands Antilles. F's only activity was to borrow money by issuing Euronotes and then lend the proceeds to P at an interest rate that was 1 percent greater than the rate on the Euronotes. Sec. 1441, I.R.C., generally requires a domestic taxpayer to withhold a 30-percent tax on interest paid to nonresident aliens. However, payments to Netherlands Antilles corporations were exempted from this tax pursuant to treaty. R determined that F was a mere conduit or agent of P, that P should be treated as having paid interest…
1Opinion of the Court
Ruwe, Judge:
Respondent determined deficiencies in petitioner’s Federal income taxes as follows:
Year Deficiency
1982 . $3,785,250
1983 . 3,785,250
1984 . 3,785,250
1985 . 3,785,250
The sole issue for decision is whether petitioner was required, pursuant to section 1441,1 to withhold tax on amounts of interest paid to nonresident aliens. If the answer is yes, petitioner is liable for the tax pursuant to section 1461.2
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts, second, third, and fourth stipulations of facts, and attached exhibits, respectively,…
2Cases cited23 opinions
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