§894 — Income affected by treaty
22 cases·5 followed·2 distinguished·1 questioned·14 cited—23% support
Statute Text — 26 U.S.C. §894
The provisions of this title shall be applied to any taxpayer with due regard to any treaty obligation of the United States which applies to such taxpayer.
For relationship between treaties and this title, see section 7852(d).
For purposes of applying any exemption from, or reduction of, any tax provided by any treaty to which the United States is a party with respect to income which is not effectively connected with the conduct of a trade or business within the United States, a nonresident alien individual or a foreign corporation shall be deemed not to have a permanent establishment in the United States at any time during the taxable year. This subsection shall not apply in respect of the tax computed under section 877(b).
A foreign person shall not be entitled under any income tax treaty of the United States with a foreign country to any reduced rate of any withholding tax imposed by this title on an item of income derived through an entity which is treated as a partnership (or is otherwise treated as fiscally transparent) for purposes of this title if—
such item is not treated for purposes of the taxation laws of such foreign country as an item of income of such person,
the treaty does not contain a provision addressing the applicability of the treaty in the case of an item of income derived through a partnership, and
the foreign country does not impose tax on a distribution of such item of income from such entity to such person.
The Secretary shall prescribe such regulations as may be necessary or appropriate to determine the extent to which a taxpayer to which paragraph (1) does not apply shall not be entitled to benefits under any income tax treaty of the United States with respect to any payment received by, or income attributable to any activities of, an entity organized in any jurisdiction (including the United States) that is treated as a partnership or is otherwise treated as fiscally transparent for purposes of this title (including a common investment trust under section 584, a grantor trust, or an entity that is disregarded for purposes of this title) and is treated as fiscally nontransparent for purposes of the tax laws of the jurisdiction of residence of the taxpayer.
Treasury Regulations
- Treas. Reg. §Treas. Reg. §1.894-1 Income affected by treaty
- Treas. Reg. §Treas. Reg. §1.894-1(a) Income exempt under treaty.
- Treas. Reg. §Treas. Reg. §1.894-1(b) Taxpayer treated as having no permanent establishment in the United States—(1) In general.
- Treas. Reg. §Treas. Reg. §1.894-1(c) §1.894-1(c)
- Treas. Reg. §Treas. Reg. §1.894-1(d) Special rule for items of income received by entities—(1) In general.
- Treas. Reg. §Treas. Reg. §1.894-1(e) Effective/applicability date.
- Treas. Reg. §Treas. Reg. §1.894-1(i) §1.894-1(i)
- Treas. Reg. §Treas. Reg. §1.894-1(v) Resident.
22 Citing Cases
We are not convinced that the parties' decision to capitalize the floating-rate nótes in response to the PwC advice demonstrates that the parties always intendedthe floating-rate notesto be an equity investment.
Section 894 provides that to the extent required by any treaty obligation of the United States, income of any kind shall be exempt from taxation and shall not be included in gross income.
Section 894 provides that, to the extent required by any treaty obligation of the United States, income (of any kind) is exempt from U.S. taxation and excluded from gross income. Here, petitioners assert that any income from the sale of the Comdisco rents that passes through to Messrs. Parmentier and de la Barre d’Erquelinnes would be exempt from U
Section 894 provides that to the extent required by any treaty obligation of the United States, income of any kind shall be exempt from taxation and shall not be included in gross income. See Tate & Lyle, Inc. v. Commissioner, 103 T.C. 656, 664 (1994). During the tax years at issue, article VII of the income tax treaty between the United States and
When interpreting a treaty, we begin with the, text of the treaty and -the' context in which the written words are -used. E. Airlines, Inc. v. Floyd, 499 U.S. -530;, 534 (1991); Sumitomo Shoii Am., Inc. v. Avaqliano, 457 U.S. 1'76, 179-180 (1982) . . The plain words of the treaty control unless their effect is contrary to the intent
Section 894 (a) , however, provides that the provisions of the Code will be applied to any' taxpayer with due regard to any treaty obligations of the United States athat apply to the taxpayer.
Under section 894, treaty provisions may modify the Code, including its withholding tax provisions. However, foreign corporations are not exempt from U.S. income taxation under a treaty between the United States and a foreign country unless the treaty is an income tax treaty and the corporation is a qualified resident of such foreign country. Sec. 884(e)
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 if the Canadian
894 (Income Affected by Treaty)). In September 1995, petitioner submitted a fourth set of documents to the IRS for each of the years in issue. The documents were entitled "Statement in Lieu of Return" and reported that petitioner received $65,000 per year in Federal Reserve Notes. Among other declarations, petitioner stated that the Federal Re
However, royalties paid by SDI USA to petitioner are exempt from taxation by virtue of section 894 and article IX of the United States-Netherlands Income Tax Convention, April 29, 1948, 62 Stat.
he Supplementary Protocol, June 15, 1955, 6 U.S.T. 3696, 1956-2 C.B. 1116, and as further amended by the United States-Netherlands Supplementary Income Tax Convention, Dec. 30, 1965, 17 U.S.T. 896, 1967-2 C.B. 472 (U.S.-Netherlands treaty). See also sec. 894. There is no comparable U.S. treaty exemption that would apply to royalty payments from petitioner to SDI Bermuda. The parties have locked horns on several aspects of the application of the statutory provisions in light of the impact of the