Off iscussionboard/do/message?action list messages&forum;_id- -1615617 18nav-dis

Question

Off iscussionboard/do/message?action list messages&forum;_id- -1615617 18nav-discussion board e... From Chapter 2: 4. Butch Bishop operates a small international firm named Tile, Inc. A new treaty between the United States and Spain conflicts with a Section of the Internal Revenue Code. Butch asks you for advice. If he follows the treaty position, does he need to disclose this on his tax return? If he is required to disclose, are there any penalties for failure to disclose? Prepare a letter in which you respond to Butch. Tile's address is 100 International Drive. Tampa, FL 33620

Explanation / Answer

Yes, Butch Bishop required to disclose on his tax return as, Disclosure is required any time a tax treaty overrides a tax law. Further, yes there are penalties, if he fails to disclose the same.

Letter for responding to Butch

ABC, CPAs

5191 Natorp Boulevard

Mason, OH 45040

January 10, 2018

Mr. Butch Bishop

Tile, Inc.

100 International Drive

Tampa, Florida 33620

Dear Mr. Bishop:

This letter is in response to your request about information concerning a conflict between a U.S. treaty with Spain and a Section of the Internal Revenue Code. The major reason for treaties between the United States and certain foreign countries is to eliminates double taxation and to render mutual assistance in tax enforcement.

Section 7852(d) provides that if a U.S. treaty is in conflict with a provision in the Code, neither will take general precedence. Rather, the more recent of the two will have precedence. In your case, the Spanish treaty takes precedence over the Code Section.

A taxpayer must disclose on the tax return any positions where a treaty overrides a tax law. There is a $1,000 penalty (per failure) for individuals who fail to disclose and a $10,000 penalty (per failure) for corporations that fail to disclose.

Should you need more information, feel free to contact me.

Sincerely,

A, CPA

Tax Partner

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