T.C. Memo. 2005-137
UNITED STATES TAX COURT
PETER M. HAVER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15706-03. Filed June 13, 2005.
Peter M. Haver, pro se.
Justin L. Campolieta, for respondent.
MEMORANDUM OPINION
LARO, Judge: Petitioner petitioned the Court to redetermine
the following Federal income tax deficiencies and additions to
tax under section 6651(a)(1):1
1
Unless otherwise noted, section references are to the
applicable versions of the Internal Revenue Code. Rule
references are to the Tax Court Rules of Practice and Procedure.
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Addition to Tax
Year Deficiency Sec. 6651(a)(1)
1997 $3,663 $380.75
1998 1,935 450.75
1999 2,832 708.00
2000 1,319 329.75
Following concessions by respondent and submission of the case
pursuant to Rule 122, we must decide whether the limitation on
the application of foreign tax credits to alternative minimum tax
(AMT) liability under section 59(a)(2) may be harmonized with
article 23(1) of the Convention Between the United States of
America and the Federal Republic of Germany for the Avoidance of
Double Taxation of August 29, 1989, 2 Tax Treaties (CCH) 77,021
(the U.S.-Germany treaty or article 23(1)). We hold that it
may.2
Background
All facts were stipulated or contained in the exhibits
submitted therewith. We incorporate herein by this reference the
parties’ stipulation of facts and the exhibits submitted
therewith. We find the stipulated facts accordingly. Petitioner
resided in Dusseldorf, Germany, when his petition was filed in
this Court.
2
Petitioner has conceded that he is subject to the sec.
6651(a)(1) penalty, stating that his returns were filed
“belatedly in January, 2003.”
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Petitioner is a U.S. citizen who during the subject years
resided in Germany and was employed there as an attorney. During
1997, 1998, 1999, and 2000, his income was derived entirely from
foreign sources, and he did not report an AMT liability as to the
income. For each of the years in issue, he had foreign tax
available for credit, entitling him to foreign tax credits under
section 59(a), and tentative AMT, as follows:
Foreign Tax
Available Sec. 59(a) Tentative
Year for Credit Credit AMT
1997 $75,148 $44,008 $36,627
1998 42,586 27,762 22,026
1999 65,161 34,822 28,324
2000 37,730 17,477 13,193
Petitioner first filed income tax returns for these years in
January 2003.
Discussion
While acknowledging that section 59(a)(2)(A) supports
respondent’s determination in full, petitioner argues that
section 59(a)(2)(A) is inapplicable to this case as it was
superseded by article 23(1). Petitioner urges that this Court
was misguided in Pekar v. Commissioner, 113 T.C. 158, 163 (1999),
and Brooke v. Commissioner, T.C. Memo. 2000-194, affd. 13 Fed.
Appx. 7 (D.C. Cir. 2001), where we held that article 23(1)
harmonizes with the application of section 59(a)(2)(A) because
article 23(1) states that the U.S.-Germany treaty shall apply in
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“accordance with the provisions and subject to the limitations of
the law of the United States”.
Petitioner notes that section 59(a)(2)(A) was enacted as
part of the Tax Reform Act of 1986, Pub. L. 99-514, sec. 701(a),
100 Stat. 2320, and that the U.S.-Germany treaty was ratified on
August 21, 1991. Petitioner contends, contrary to our holdings
in Pekar and Brooke, that irreconcilable differences exist
between the U.S.-Germany treaty and section 59(a)(2)(A) and that
the treaty controls because it was ratified at a later date.
See, e.g., Taylor v. Morton, 23 F. Cas. 784, 786-787 (C.C.D.
Mass. 1855) (establishing the so-called later in time rule),
affd. 67 U.S. (2 Black) 481 (1863). Petitioner concedes,
however, that we must attempt to reconcile a statute with a
potentially conflicting treaty before applying the later in time
rule. See, e.g., Whitney v. Robertson, 124 U.S. 190, 194 (1888);
Murray v. Schooner Charming Betsy, 6 U.S. (2 Cranch) 64, 118
(1804) (“an Act of Congress ought never to be construed to
violate the law of nations if any other possible construction
remains”). Respondent argues that this Court can reconcile the
statute with the treaty as it did in Pekar and Brooke, and that
we should follow those cases. We agree with respondent.
In Pekar v. Commissioner, supra, and Brooke v. Commissioner,
supra, we concluded that article 23(1) specifically recognized
the “provisions” and “limitations” of existing U.S. law,
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including those contained in section 59(a)(2)(A). We find no
reason to depart from these holdings to follow petitioner down a
twisting path of legal analysis whose ultimate destination would
require us to reverse two prior holdings and find a provision of
U.S. law in conflict with the U.S.-Germany treaty. We hold in
accordance with our previous decisions in Pekar and Brooke that
the limitation of section 59(a)(2)(A) applies to petitioner.3
We have considered all of the parties’ arguments and
rejected those not discussed herein as meritless. To reflect
respondent’s concession,
Decision will be entered
under Rule 155.
3
Petitioner raises for our consideration Kappus v.
Commissioner, 337 F.3d 1053 (D.C. Cir. 2003), affg. T.C. Memo.
2002-36, where the Court of Appeals for the District of Columbia
Circuit opted not to decide whether sec. 59(a)(2)(A) conflicted
with an article of the U.S.-Canada treaty similar to article
23(1), by holding that sec. 59(a)(2)(A) controlled the outcome as
the later of the two provisions. Petitioner infers erroneously
from the court’s holding in Kappus that the statute and the U.S.-
Germany treaty cannot be reconciled. The court never considered
that question. Nor did the court say anything inconsistent with
its previous affirmance of our decision in Brooke v.
Commissioner, T.C. Memo. 2000-194.