The U.S. Tax Court granted summary judgment for the IRS in a case concerning the disallowance of deductions and credits claimed by a taxpayer (foreign corporation) that did not file tax returns until after the IRS issued a deficiency notice.
The case is: Adams Challenge (UK) Ltd. v. Commissioner, 156 T.C. No. 2 (January 21, 2021).
The taxpayer (a UK corporation) had as its sole income-producing asset a multipurpose support vessel. The vessel was chartered by a U.S. firm to assist in decommissioning oil and gas wells and removing debris on portions of the U.S. outer continental shelf in the Gulf of Mexico. During 2009 and 2010, the taxpayer derived from the charter gross income of about $32 million, which was eventually found to be effectively connected with the conduct of a U.S. trade or business. Read TaxNewsFlash
The Tax Court held that under section 882(c)(2), the taxpayer was not entitled to the benefit of deductions or credits because it did not submit “returns” for 2009 and 2010 until after the IRS had prepared and subscribed returns for it. The court also found that section 882(c)(2) does not violate either the business profits article or the nondiscrimination article of the tax treaty.
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