Container Corp. v. Comm'r
United States Tax Court
Vitro, a Mexican corporation, charged P -- one of its U.S. subsidiaries -- a fee to guarantee P's debts. R determined a deficiency for failure to withhold 30 percent of such fees as "fixed or determinable annual or periodical" income received from a U.S. source under section 881(a), I.R.C. Held: The guaranty fees are analogous to payments for a service and therefore are not U.S. source income.
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Vitro, a Mexican corporation, charged P -- one of its U.S. subsidiaries -- a fee to guarantee P's debts. R determined a deficiency for failure to withhold 30 percent of such fees as "fixed or determinable annual or periodical" income received from a U.S. source under section 881(a), I.R.C. Held: The guaranty fees are analogous to payments for a service and therefore are not U.S. source income. Under sec. 1.861-4, Income Tax Regs., the source of the service is where the service is performed. Because the guaranty was provided from Mexico, fees for the guaranty are Mexican source income. Thus, P…
1Opinion of the Court
OPINION
Holmes, Judge:
The Code puts a 30-percent tax on “fixed or determinable annual or periodical” income received by foreign corporations from sources within the United States. Vitro, S.A. is a Mexican corporation that charged one of its U.S. subsidiaries a fee to guarantee the subsidiary’s debt to U.S. lenders. The question presented in this case is whether that fee is from a source within the United States.
Background
In 1901, Vitro, S.A. started making glass bottles for the local beer makers of Monterrey, Mexico. Over the next century, Vitro became one of Mexico’s most successful…
2Cases cited16 opinions
- Deputy, Administratrix v. Du PontSupreme Court of the United States · 1940
- Putnam v. CommissionerSupreme Court of the United States · 1956
- Commissioner v. WodehouseSupreme Court of the United States · 1949
- Centel Communications Co. v. CommissionerUnited States Tax Court · 1989
- Dillin v. CommissionerUnited States Tax Court · 1971
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3Cited by1 opinion
- Container Corp. v. Comm'rUnited States Tax Court · 2010