Text extracted via OCR from the original document. May contain errors from the scanning process.
I'm not ignoring you - but you probably also don't want to hear that you were in my junk folder : )
sorry. interesting information below on 881 - have to pull legislative history on initial enactment because still no
definition of obligation:
Section 881(b) provides exemptions from, or reductions of, withholding tax and branch profits tax on certain U.S.-source income
received by corporations organized in U.S. possessions. As one of the conditions for such treatment in certain cases, section 881(bX1)
(C) sets forth a "base-erosion' test requiring that no substantial part of the possessions corporation's income be used to satisfy
obligations to -persons" who are not bona fide residents of such a possession or of the United States. Section 937(a) provides in relevant
part that for purposes of section 881(b), except as provided in regulations, a "person' is a bona fide resident if the person satisfies the
requirements of section 937(a). For purposes of the base-erosion test, §1.881-5T(f)(4)(i) defines a bona fide resident of a possession by
reference to §1.937-1T, which provides that only a natural person, rather than a juridical person, may qualify as a bona fide resident of a
possession. Similarly, §1.881-57(f)(4)(ii) defines bona fide residents of the United States for purposes of the base-erosion test as
including only certain individuals who are citizens or residents of the United States.
Commentators observed that the interaction of these rules in the proposed and temporary regulations could result in disqualifying
income from the withholding tax exceptions in any situation where the possessions corporation makes payments to satisfy obligations to
persons other than individuals. These commentators further noted that many common business arrangements would run afoul of the
base-erosion test if corporations cannot constitute bona fide residents.
The IRS and Treasury agree that such results would be undesirable and unintended. In the context of section 881(b), the IRS and
Treasury believe that the statutory terms persons and bona fide residents should not be interpreted as limited to individuals. Accordingly,
the final regulations additionally provide that a corporation, or a business association that is treated as a corporation for tax purposes,
may qualify as a bona fide resident of a relevant possession or the United States for purposes of the base-erosion test if it is created or
organized in that jurisdiction. The final regulations reflect that section 937(a) and the regulations under that section are intended to apply
only to individuals in determining whether a person is a bona fide resident of a possession within the meaning of section 881(b)(1XC).
Note that the IRS and Treasury believe that the words 'direct or indirect' in section 881(b)(1XC) (and §1.881-5(c)(3)) would authorize an
anti-abuse rule that prohibits payments to possessions corporations that are a part of back-to-back loan arrangements or other base
erosion schemes. Accordingly, the IRS and Treasury are strongly considering including such an anti-abuse rule when finalizing the
remaining proposed and temporary regulations under section 881(b). It is expected that any such anti-abuse rule would be retroactive to
January 31, 2006.
Commentators also proposed that the final regulations adopt a special rule whereby publicly traded corporations may qualify for
favorable tax treatment without regard to the conditions under section 881(b)(1), including the base- erosion test. A similar rule is
provided under section 884(e)(4)(3) and §1.884- 5(d) under the branch profits tax. However, the final regulations do not adopt such a
special rule in this context. The IRS and Treasury note that section 881(b) does not grant authority to depart from the statutory conditions
of section 881(b)(1), including the base-erosion test.
On Fri, Jan 21, 2011 at 5:24 AM, Jeffrey Epstein <jee
tuL@I gmail.com> wrote:
any thought on the 881 indirect issue
***********************************************************
The information contained in this communication is
confidential, may be attorney-client privileged, may
constitute inside information, and is intended only for
the use of the addressee. It is the property of
Jeffrey Epstein
Unauthorized use, disclosure or copying of this
communication or any pan thereof is strictly prohibited
and may be unlawful. If you have received this
EFTA00648459
communication in error, please notify us immediately by
return e-mail or by e-mail to jeevacation@gmail.com and
destroy this communication and all copies thereof,
including all attachments. copyright -all rights reserved
Erika A. Kellerhals, P.C.
41-42 Kongens Gade
St. Thomas VI 00802
(office)
(cell)
fax
Notice: This communication may contain privileged or other confidential information. If you are not the
intended recipient, or believe that you have received this communication in error, please do not print, copy, re-
transmit, disseminate, or otherwise use this information. Also, please indicate to the sender that you have
received this e-mail in error, and delete the copy you received. Thank you.
Required by the IRS: Any tax advice in this email (including any attachments) is not intended to be used, and
cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing,
or recommending to another party any transaction or matter presented herein.
EFTA00648460