Academic journal article Journal of Accountancy

Rent Allocated to Foreign Corporation Subject to Gross Income Tax

Academic journal article Journal of Accountancy

Rent Allocated to Foreign Corporation Subject to Gross Income Tax

Article excerpt

In Central de Gas de Chihuahua, S.A. v. Commissioner, the Tax Court ruled that rent allocated to a foreign corporation under a tax code section 482 adjustment was subject to a 30% gross income tax imposed by section 881.

Central de Gas de Chihuahua, S.A., a Mexican corporation, loaned a fleet of tractors and trailers rent-free to a sister Mexican corporation. The fleet was used to transport liquefied petroleum gas from sites in the United States to Mexico. The Internal Revenue Service allocated rents to Central de Gas under section 482, which grants it authority to allocate items of income and expense among related parties to reflect income properly.

The IRS asserted that the rents allocated to Central de Gas were subject to tax under section 881(a), which in part imposes a 30% tax on fixed or determinable annual or periodic (FDAP) income (such as rents, interest or dividends) received by foreign corporations from sources within the United States. Central de Gas did not dispute the IRS's allocation of rents under section 482 but contended the term received as used in section 881(a) applied only to actual payments from sources within the United States.

Absent any direct precedent under section 881, both parties argued that code section 1442, which requires withholding of tax from amounts paid to foreign corporations subject to U. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.