1995 Tax Ct. Memo LEXIS 550 | Tax Ct. | 1995
1995 Tax Ct. Memo LEXIS 550">*550 Decisions will be entered for petitioners for 1986 and for respondent for 1987.
MEMORANDUM OPINION
COUVILLION,
By separate notices of deficiency, respondent determined the following deficiencies in and additions to petitioners' Federal income taxes:
Additions to Tax | |||
Year | Deficiency | Sec. 6651(a)(1) | Sec.6653(a)(1) |
1986 | $ 1,998 | $ 499.50 | $ 99.90 |
1987 | 1,794 | 449.00 | 90.00 |
Following concessions by the parties, 2 the issues for decision for the year 1987 are: (1) Whether petitioners are subject to the application of
Some of the facts were stipulated, and those facts, with the annexed exhibits, are so found and are incorporated herein by reference. At the time the petition was filed, petitioners' legal residence was Saint John, New Brunswick, Canada.
Petitioners, nonresident United States citizens, have resided in Canada since 1979. William David Jamieson (petitioner), an attorney, is employed as vice president, corporate and legal, 1995 Tax Ct. Memo LEXIS 550">*552 with The Irving Group in St. John, New Brunswick, Canada. Petitioners filed separate Canadian income tax returns and paid Canadian income taxes totaling $ 89,722.80 for tax year 1987.
On March 22, 1993, petitioners filed their U.S. Federal income tax return for tax year 1987. While petitioners reported some U.S. source income in the form of interest and dividends, most of the income reported was foreign source, taxable in Canada. Petitioners reported a tax liability for 1987 of $ 42,953.48 and claimed an alternative minimum foreign tax credit under
Respondent determined that petitioners have an alternative minimum tax liability for 1987 under
Petitioners do not dispute respondent's determination of their precredit alternative minimum tax under
Article XXIV(4)(b), Elimination of Double Taxation, provides, in pertinent part, "For the purposes of computing the United States tax, the United States shall allow as a credit against United States tax the income tax paid or accrued to Canada". Article XXIX(2) provides, in pertinent part, that nothing in the U.S.-Canada Treaty shall prevent the United States or Canada from taxing1995 Tax Ct. Memo LEXIS 550">*554 its citizens as if there were no convention between the U.S. and Canada with respect to income taxes on income and on capital. Article XXIX(3) provides, however, that the provisions of paragraph (2) shall not affect the obligations undertaken by the two countries with respect to article XXIV, Elimination of Double Taxation.
Petitioners conclude that the above U.S.-Canada Treaty provisions forbidding double taxation of income override the provisions of
The Commissioner's determinations in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving that those determinations are erroneous.
In
The U.S-Canada Treaty became effective on August 16, 1984.
1995 Tax Ct. Memo LEXIS 550">*557 Petitioners alternatively argue that the third protocol, i.e., the amendment to the U.S.-Canada Treaty that was signed on August 31, 1994, contains language against double taxation similar to the U.S.-Canada Treaty in effect during 1987. As a later expression of the sovereign will, petitioners argue that the third protocol overrides
Petitioners filed their 1987 Federal income tax return on March 19, 1993. At trial, petitioner stated that on-going audits of his Canadian income tax returns by Revenue Canada since 1985, and the increased complexity of the Internal Revenue Code after the Tax Reform Act of 1986, interfered with the filing of petitioners' return. The audit of petitioners' Canadian returns, however, was completed and resolved sometime in 1989.
Petitioner is an attorney employed as the executive of a large Canadian corporation. If petitioners did not have the expertise to file their 1987 return in an accurate and timely manner, they could have retained counsel or other professional assistance. Despite the fact that their Canadian audit was completed in 1989, petitioners waited until March 19, 1993, to file their 1987 return. Petitioners' failure to file their 1987 return in a timely manner was not reasonable. Accordingly, petitioners1995 Tax Ct. Memo LEXIS 550">*559 are liable for the addition to tax under
Petitioners failed to establish that they should not be held liable for the addition to tax under
Footnotes
1. Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the years at issue. All Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. In their pleadings, petitioners alleged that respondent was barred from assessing and collecting taxes against them for the years at issue because of the period of limitations under sec. 6501(a). In the answer, respondent denied the allegation and affirmatively alleged that respondent was not barred. At trial, petitioners conceded this issue. Also at trial, respondent conceded the deficiency and additions to tax against petitioners for 1986.↩
3. The treaty became effective on Aug. 16, 1984, having been signed on Sept. 26, 1980, and amended on June 14, 1983, and Mar. 28, 1984, and was in effect during 1987. The treaty was further amended on Aug. 31, 1994, but that amendment had not been ratified as of the date of this opinion.↩
4. The use of this "later-in-time" rule is supported by provisions of the Technical & Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L. 100-647, 102 Stat. 3342, 3531. See
, 98 T.C. 672">676-677 (1992). Pursuant to TAMRA, these provisions as enacted on Nov. 10, 1988, are effective for tax years beginning in 1987 and thereafter. See sec. 1012(aa)(4) of TAMRA. Since the year at issue in this case is 1987, the provisions are applied retroactively to petitioner. The Court finds that this period of retroactivity is a modest one and does not violate petitioner's right of due process.Lindsey v. Commissioner , 98 T.C. 672">98 T.C. 672 , 103 T.C. 656">675 (1994) (quotingTate & Lyle v. Commissioner , 103 T.C. 656">103 T.C. 656 ,U.S. v. Carlton , 512 U.S.114 S. Ct. 2018">114 S. Ct. 2018 , 114 S. Ct. 2018">2022↩ (1994)).5. Furthermore, the untimely filing of petitioners' return was negligent. See
(1989), affd. on other groundsEmmons v. Commissioner , 92 T.C. 342">92 T.C. 342898 F.2d 50">898 F.2d 50↩ (5th Cir. 1990).