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Del Commercial Properties, Inc. v. Commissioner of Internal Revenue Service

Order requiring plaintiff to pay over a million dollars in taxes and additions affirmed because plaintiff did not establish that its failure to file tax returns or deposit withholding taxes was due to reasonable cause rather than willful neglect; while plaintiff purported that the transactions at issue were founded on the U.S.-Netherlands Tax Treaty, plaintiff failed to prove that it had any other purpose than avoiding U.S. taxes.

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Argued March 13, 2001

Sentelle, Circuit Judge:

On July 18, 1990, Delcom Financial Ltd., a Canadian corporation, took out an $18 million loan from the Royal Bank of Canada. This loan initiated a series of transactions over the next twenty-four hours, involving five companies organized in Canada, the Cayman Islands, the Netherlands Antilles, the Netherlands, and the United States-all of which were related to each other and to Delcom Financial. The final transaction was a $14 million loan from Del Investments Netherlands B.V. (“Del BV”), a Dutch corporation, to Del Commercial Properties, Inc., an American corporation. Over the next year and a half, Del Commercial repaid Del BV, who then transferred the payments to Delcom Financial (or another related corporation), who in turn paid off the Royal Bank loan. In July 1992, Del Commercial began repaying Delcom Financial directly. Throughout this entire period, however, Del BV reported Del Commercial’s interest payments on its Dutch tax returns.

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