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Liggett Group, Inc. v. Commissioner

58 T.C.M. (CCH) 1167 (1990)

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Liggett Group, Inc. v. Commissioner

United States Tax Court
58 T.C.M. (CCH) 1167 (1990)

Facts

Paddington (plaintiff) was a Delaware corporation and the exclusive United States (US) distributor of J&B Rare Scotch Whiskey (J&B Rare) produced by Justerini & Brooks, Ltd. (J&B), a British alcohol producer. Paddington and J&B never used the term “F.O.B.” on their written contracts. However, both companies generally understood that title and liability with respect to shipments of J&B Rare from Britain transferred to Paddington at the British origin. Most of Paddington’s J&B Rare customers ordered through Paddington’s direct-import sales process. Under the direct-import process, Paddington’s customers received shipments directly from J&B in the United Kingdom (UK) at port in the British Isles. Under the direct-import agreements, Paddington’s customers explicitly agreed to “F.O.B. United Kingdom” in the written terms. In all sales, Paddington paid J&B, and Paddington’s customers paid Paddington. Paddington paid UK taxes on its direct-import sales. Paddington sought to credit those UK taxes against its US tax liability for those sales. The Internal Revenue Service (defendant) took the position that Paddington was not entitled to a foreign tax credit because the income did not come from outside the US.

Rule of Law

Issue

Holding and Reasoning (Wright, J.)

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Casebooks

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