al SECTION 41.-[ACCOUNTING PERIODS AND METHODS OF ACCOUNTING]-GENERAL RULE REGULATIONS 118, SECTION 39.41-2: Bases of computation and changes in accounting methods. INTERNAL REVENUE CODE Rev. Rul. 54-4 A modification of a taxpayer's accounting procedures whereby pennies would be eliminated from certain internal financial transactions by increasing or decreasing the amount to the nearest dollar will be acceptable for Federal income tax purposes provided such procedures, once adopted, are maintained with reasonable consistency. Advice is requested whether a proposed modification of a taxpayer's accounting procedures whereby pennies would be eliminated from certain internal transactions by increasing or decreasing the amount to the nearest dollar will be acceptable for Federal income tax purposes. Under the proposed plan pennies would be eliminated in the processing of figures relating to certain internal transactions such as accounts payable distributions, sales distributions, and payroll distributions. Balance sheet accounts, including balances due to and from employees, and others, would be kept on an exact amount basis. However, in the internal distributions, pennies would be eliminated at the earliest stage of the accounting operations. If an amount ends in 50 cents or more, it would be rounded upward to the next dollar, and if less than 50 cents, the pennies would be dropped. The net variances resulting from penny eliminations should be minor since the pennies added and dropped would tend to offset each other. Such variances will be recorded as debits or credits in a penny elimination account which will be maintained for balancing purposes. At the end of the taxable year, of this account will represent additional income or expense depending at upon its balance. 83 In view of the foregoing, it is held that the proposed modification of the taxpayer's accounting procedures whereby pennies would be eliminated from certain internal financial transactions is acceptable for Federal income tax purposes provided that such procedures, once n adopted, are maintained with reasonable consistency. 1 SECTION 119 (e).-INCOME FROM SOURCES WITHIN INTERNAL REVENUE CODE Determination of United States and Canadian income of bus com panies operating routes across the border. (See Rev. Rul. 54–5, p. 10). 283440-53- -2 SECTION 131 (c).-TAXES OF FOREIGN COUNTRIES AND POSSESSIONS OF UNITED STATES: ADJUSTMENTS ON PAYMENT OF ACCRUED TAXES. REGULATIONS 118, SECTION 39.131 (c)-1: Redetermination of tax when credit proves in correct. (Also Section 119 (e), Section 39.119 (e)-2.) INTERNAL REVENUE CODE Rev. Rul. 54-5 Determination of United States and Canadian income of bus companies operating routes across the border. 1. Purpose. The purpose of this Revenue Ruling is to outline the principles that have been agreed upon between the Internal Revenue Service and the Department of National Revenue of Canada for the determination of the Canadian income of United States bus companies operating routes which enter Canada, and Canadian bus companies operating routes which enter the United States. The use by the respective taxing authorities of uniform principles is necessary to prevent double taxation of income in contravention of Article XVI of the tax convention with Canada. 2. Internal Revenue Code provisions affected. The principles herein promulgated will be followed by the Internal Revenue Service: (1) in the allowance of Canadian tax credits to domestic bus companies under section 131 of the Internal Revenue Code, including any redetermination of tax when the credit proves incorrect, as provided in section 39.131 (c)-1 of Regulations 118 and corresponding provisions of prior regulations; and (2) in the determination, under section 119 (e) of the Internal Revenue Code, of the taxable income of Canadian bus companies operating in the United States, including determinations under section 39.119 (e)-2(h) of Regulations 118 and corresponding provisions of prior regulations. 3. Definitions. For the purpose of this Revenue Ruling, a bus company is defined as a common carrier operating intercity highway passenger buses, along with the usual incidental baggage, express, mail, newspaper, and similar transportation services. An operating "division" is defined as the portion of the operations of a bus company between certain terminal cities or over certain highways, sometimes called a "route," for which separate revenue and expense accounts are maintained. In case a bus company does not maintain such divisional revenue and expense accounts, the entire company is considered an "operating division" for the purpose of this Revenue Ruling. 4. Determination of Canadian income of a domestic bus company.In the absence of compelling reasons to the contrary, the portion of the net income of a domestic bus company operating in Canada, attributable to Canadian sources, will be determined by taking an allocable part of the net income of each division operating across the border, in accordance with the following principles: (a) The portion of the divisional net income attributable to Ca nadian sources is the ratio of Canadian operating revenues to total of one of the contracting States shall not be deemed to have a permanent (i) Income from real property; (ii) Income from mortgages, from public funds, securities (including mortgage bonds), loans, deposits, and current accounts; (iii) Dividends and other income from shares in a corporation; (v) Profit or loss from the sale or exchange of capital assets; Subject to the provisions of the present convention, the income referred to in (h) The term "competent authority" or "competent authorities" means, in the case of the United States, the Commissioner of Internal Revenue or his duly authorized representative; and in the case of Belgium, the Directeur General de l'Administration des Contributions Directes or his duly authorized representative; and, in the case of any territory to which the present convention is extended under Article XXII, the competent authority for the administration in such territory of the taxes to which the present convention applies. (2) In the application of the provision of the present convention by either of the contracting States, any term which is not otherwise defined shall, unless the context otherwise requires, have the meaning which that term has under the laws of such contracting State relating to the taxes which are the subject of the present convention. ARTICLE VI Income of whatever nature derived from real property shall be taxable only in the contracting State in which the real property is situated. This Article does not apply to income derived from mortgages or bonds secured by real property. ARTICLE VIII (1) The rate of United States tax on dividends derived from sources within the United States by a resident or corporation or other entity of Belgium not having a permanent establishment within the United States shall not exceed 15 percent. (2) Belgium shall not impose on dividends derived from sources within Belgium by a resident or corporation or other entity of the United States not having a permanent establishment within Belgium any tax in the nature of a personal complementary tax or surtax thereon, or any tax similar to that withheld at the source on dividends under United States law in the case of nonresident aliens and foreign corporations. ARTICLE VIIIA The rate of tax imposed by each of the contracting States upon interest (on bonds, notes, debentures, or on any other form of indebtedness) derived from Sources within such State by a resident or corporation or other entity of the other State not having a permanent establishment within the former State shall not exceed 15 percent. TREASURY DEPARTMENT, OFFICE OF COMMISSIONER OF INTERNAL REVENUE, Washington 25, D. C. To Officers and Employees of the Internal Revenue Service and Others Concerned: Section 7.1100. Introductory. 7.1101. Dividends. 7.1102. Interest. TABLE OF CONTENTS 7.1103. Natural resource royalties and real property rentals. 7.1104. Patent and copyright royalties and film rentals. 7.1105. Private pensions and annuities. 7.1106. Release of excess tax withheld at source. 7.1107. Addressee not actual owner. 7.1108. Information to be furnished in ordinary course. 7.1109. Beneficiaries of a domestic estate or trust. SECTION 7.1100. INTRODUCTORY.-The income tax convention between the United States and Belgium, signed October 28, 1948, as modified and supplemented by the supplementary convention between such Governments, signed September 9, 1952, and proclaimed by the President of the United States on September 23, 1953, hereinafter referred to as the convention, provides in parts as follows, effective with respect to income derived in taxable years beginning on or after January 1, 1953: ARTICLE I (1) The taxes which are the subject of the present convention are: (b) In the case of Belgium. The income taxes, the national crisis tax, and the personal complementary tax, including all additions to these taxes. (2) The present convention shall apply also to any other taxes of a substantially similar character imposed by either contracting State subsequently to the date of signature of the present convention or by the government of any territory to which the present convention is extended under Article XXII. (3) In the event of appreciable changes in the fiscal laws of either of the contracting States the competent authorities of the contracting States will consult together. ARTICLE II (1) In the present convention, unless the context otherwise requires; (a) The term "United States" means the United States of America, and when used in a geographical sense means the States, the Territories of Alaska and of Hawaii, and the District of Columbia. (b) The term "Belgium" when used in a geographical sense means the Kingdom of Belgium in Europe. (c) The term "United States enterprise" means an industrial or commercial enterprise or undertaking carried on in the United States by a citizen or resident of the United States or by a corporation or other juridical person created or organized in the United States or under the laws of the United States or of any State or Territory of the United States. (d) The term "Belgian enterprise" means an industrial or commercial enterprise or undertaking carried on in Belgium by a citizen or resident of Belgium or by a corporation or other juridical person created or organized in Belgium or under the laws of Belgium. (e) The terms "enterprise of one of the contracting States" and "enter prise of the other contracting State" mean a United States enterpri Belgian enterprise, as the context requires. (f) The term "permanent establishme enterprise of one of the contracting oil well, plantation, workshop, war of business, but does not include ally exercises, a general auth behalf of such enterprise which he regularly fills of one of the contracting States shall not be deemed to have a permanent establishment in the other contracting State merely because it carries on business dealings in such other contracting State through a bona fide commission agent or broker acting in the ordinary course of his business as such. When a corporation of one contracting State has a subsidiary corporation which is a corporation created or organized in the other contracting State or which is engaged in trade or business in such other contracting State, such subsidiary corporation shall not, merely because of that fact, be deemed to be a permanent establishment of its parent corporation. (g) The term "industrial and commercial profits" shall not include the following: (i) Income from real property; (ii) Income from mortgages, from public funds, securities (including mortgage bonds), loans, deposits, and current accounts; (iii) Dividends and other income from shares in a corporation; (v) Profit or loss from the sale or exchange of capital assets; Subject to the provisions of the present convention, the income referred to in subparagraphs (i) to (vi) shall be taxed separately or together with industrial and commercial profits in accordance with the laws of the contracting States. (h) The term "competent authority" or "competent authorities" means, in the case of the United States, the Commissioner of Internal Revenue or his duly authorized representative; and in the case of Belgium, the Directeur General de l'Administration des Contributions Directes or his duly authorized representative; and, in the case of any territory to which the present convention is extended under Article XXII, the competent authority for the administration in such territory of the taxes to which the present convention applies. (2) In the application of the provision of the present convention by either of the contracting States, any term which is not otherwise defined shall, unless the context otherwise requires, have the meaning which that term has under the laws of such contracting State relating to the taxes which are the subject of the present convention. ARTICLE VI Income of whatever nature derived from real property shall be taxable only in the contracting State in which the real property is situated. This Article does not apply to income derived from mortgages or bonds secured by real property. ARTICLE VIII (1) The rate of United States tax on dividends derived from sources within the United States by a resident or corporation or other entity of Belgium not having a permanent establishment within the United States shall not exceed 15 percent. (2) Belgium shall not impose on dividends derived from sources within Belgium by a resident or corporation or other entity of the United States not having a permanent establishment within Belgium any tax in the nature of a personal complementary tax or surtax thereon, or any tax similar to that withheld at the source on dividends under United States law in the case of nonresident aliens and foreign corporations. ARTICLE VIIIA The rate of tax imposed by each of the contracting States upon interest (on bonds, notes, debentures, or on any other form of indebtedness) derived from sources within such State by a resident or corporation or other entity of the other State not having a permanent establishment within the former State shall not exceed 15 percent. |