§1461 — Liability for withheld tax

Section 1461 provides that "[e]very person required to deduct and withhold any tax under * * * [chapter 3] is hereby made liable for such tax".

We hold that petitioner, having failed to make the proper withholding under section 1442, is liable for the tax under section 1461 in accordance with the Rule 155 computation ofearnings and profits.

If the answer is yes, petitioner is liable for the tax pursuant to section 1461.2 1Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.

rporation organized under the law ofthe Republic ofPanama, and petitioner is a corporation organized under the law ofFlorida. - 60 - [*60] withhold that ta:(cid:16)04a1t the source. Ifthe payor does not do so, it becomes liable for such taxes under section 1461. Petitioner paid a constructive dividend to the extent ofits earnings and profits emanating from Mr. Parker's use ofthe Valdemossa and Key Biscayne homes. Petitioner failed to withhold a tax equal to 30% ofthe dividends distributed to Vil

,785,250 1985 . 3,785,250 The sole issue for decision is whether petitioner was required, pursuant to section 1441, 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. 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, are incorporated herein by this reference. Petitio

Under section 1461, withholding agents are personally liable for the tax they are required to deduct and withhold under chapter 3 (sections 1441 through 1464). If the recipient of the income subject to withholding pays the tax against which the withholding tax could be credited, however, the withholding agent is relieved of liability for withholding tax

Under section 1461, withholding agents are personally liable for the tax they are required to deduct and withhold under chapter 3 (sections 1441 through 1464). If the recipient of the income subject to withholding pays the tax against which the withholding tax could be credited, however, the withholding agent is relieved of liability for withholding tax

When asked whether any income tax sections have similar text, petitioner indicated that section 1461 "makes the withholding [tax] agent for non-resident aliens and foreign corporations liable for the income tax." In essence, petitioner's argument is that there is no specific provision directing him to pay or stating that he is liable for income tax.

ofsuch income are generally required under sections 1441 and 1442 to deduct and withhold therefrom an amount equal to the tax imposed by sections 871 and 881, and in the event that they fail to do so they are liable for those withholding taxes under section 1461. In 1984, Congress repealed the 30% withholding tax imposed by sections 871 and 881 with respect to certain interest paid on portfolio debt, referred to as "portfolio interest". For the most part, and as relevant here, portfolio interest

ofsuch income are generally required under sections 1441 and 1442 to deduct and withhold therefrom an amount equal to the tax imposed by sections 871 and 881, and in the event that they fail to do so they are liable for those withholding taxes under section 1461. In 1984, Congress repealed the 30% withholding tax imposed by sections 871 and 881 with respect to certain interest paid on portfolio debt, referred to as "portfolio interest". For the most part, and as relevant here, portfolio interest

As the basis for his disagreement with respondent's de- terminations, petitioner stated as follows: Petitioner is not the person made liable by law under IRC §§1461 & 1463 for the payment ofthe tax, or the penalty.

Hill took several frivolous positions, arguing that he was not liable for income tax because he is not a withholding agent under section 1461, was not involved in a trade or business, and did not have any income from a trade or business.

Petitioner therefore asserts that the amounts he received from all third-party payors are not gain or profit from a trade or business as defined in section 7701(a)(26), taxable income, or gross income.

to - 5 - file..a retürn therébyassessing;11imselfcr he 'may' choose not to do so.r(A definition of 'may': can be föurLd in any dictionarý¡)"; and (3) "The onlýpersön÷in the Cbdé required!to file a tax return for-income taxes is the withholding agèni; referred toin Section 1461 and the only Persons referred to in Section 7203 (the Sèction used to erroneously send Per'sóns to.prison) areWithholdingAgent's (See Section 7343)" * * * [áíid] "Petitioñer is not a Withholdiág:Agent referred to in Secti

(GXE), during 1994, 1995, and 1996 (the years in issue), is liabl for withholding tax deficiencies under section 1461 for the years in issue in the amounts determined by respondent or in some lesser amounts; and (2) whether petitioner is liable for additions tp tax under section 6651(a)(1) for failing to file Forms 1042, Annual Withholding Tax Return for U.S Source Income of Foreign Persons, or Forms 1042S, Foreign Person s U.S.

Thus, the military retirement pension payments at issue are not distributions from a section 401(a) qualified trust, and section 402(a) is not applicable.2 It is clear that gross income generally includes income from pensions, including military retirement benefits. Sec. 61(a)(11); secs. 1.61-2(a)(1) and 1.61-11(a), Income Tax

uch interest are generally required under sections 1441 and 1442 to deduct and withhold therefrom an amount equal to the tax imposed by sections 871 and 881, and in the event that they fail to do so they are liable for those withholding taxes under section 1461. In 1984 Congress repealed the 30-percent withholding tax imposed by sections 871 and 881 with respect to certain interest paid on portfolio debt, referred to as “portfolio interest”.9 Deficit Reduction Act of 1984 (DEFRA), Pub. L. 98-369

Under section 894, U.S. treaty provisions may modify the Internal Revenue Code, including the withholding tax provisions. For the years at issue, under a treaty between the United States and Canada (U.S.-Canada Treaty), interest payments made by U.S. taxpayers to Canadian corporations are subject to tax at a rate not exceeding 15 percent

- 2 - liable under section 1461 for his failure to withhold tax due under section 881, as required by section 1442, on payments made by such limited partnerships to A-Alphatronics Hong Kong Limited (A-Alpha), a Hong Kong corporation, for research and development services, to the extent that such payments were U.S.

Section 1461 imposes liability for the tax due on every person required to deduct and to withhold the tax imposed pursuant to section 1441(a). However, interest that is treated as income from sources without the United States is not subject to withholding tax pursuant to section 1.1441-1, Income Tax Regs., or, therefore, section 1.1442-1, Income Ta

Section 1461 imposes liability for the tax due on every person required to deduct and to withhold the tax imposed pursuant to section 1441(a). However, interest that is treated as income from sources without the United States is not subject to withholding tax pursuant to section 1.1441-1, Income Tax Regs., or, therefore, section 1.1442-1, Income Ta

Section 1461 makes the payor personally liable for this withholding tax. The income and tax referred to in these sections are required to be reported annually on Form 1042, U.S. Annual Return of Income Tax To Be Paid at Source. Respondent determined deficiencies of $3,785,250 for each of the taxable years 1982 through 1985 with respect to petitione