Five Percent Tax Rate under U.S.-Netherlands Income Tax Treaty and the Impact of Anti-Abuse Provision

Article Abstract:

The Internal Revenue Service (IRS) recently held that the five per cent reduced rate of United States tax involved in Article 7 of the treaty with Netherlands would apply to a certain corporate situation where dividends were paid to a Netherlands firm by a United States firm. Less than one quarter of the gross income of the United States was comprised of its own interest and dividends. The Netherlands firms had about one quarter of the voting stock of the United States firm. The chain of ownership of the United States firm was not dispositive, but the relationship between it and the Netherlands corporation was. The Treasury Department perspective on anti-abuse provisions is analyzed.

Interpretation and construction, Tax law

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Constructive Receipt and Economic Benefit: Putting Reed in the Proper Perspective

Article Abstract:

Charles Falk contends that the First Circuit Court of Appeals decision in Reed v. Commissioner overrules previous decisions in the area of escrow accounts, actual and constructive receipt and economic benefit. The pro-taxpayer conclusion will have strong impact and could affect the Supreme Court. Both constructive receipt and economic benefit are described as controversial aspects of the Reed case. The article suggests that taxpayers may be encouraged by the success of Reed to count on increased tax deferrals. The writer reviews the facts and concludes that the decision in Reed was just but the Court's reasoning was faulty.

Cases, Employee benefits, Courts

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