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(c)(1) of � 1.901-2A, A has established that the
country X income tax as applied to dual capacity
persons and the country X income tax as applied to
persons other than dual capacity persons together
constitute a single levy. A has also established that
that levy is an income tax within the meaning of
paragraph (a)(1) of this section. Pursuant to the
terms of the contract, country X has agreed to assume
any country X tax liability that A may incur with
respect to A’s income from that contract. For federal
income tax purposes, A’s income from that contract
includes the amount of tax liability that is imposed by
country X on A with respect to its income from the
contract and that is assumed by country X; and for
purposes of section 901 the amount of such tax
liability assumed by country X is considered to be paid
by A. By reason of paragraph (f)(2)(i) of this
section, country X is not considered to provide a
subsidy, within the meaning of paragraph (e)(3) of this
section, to A.
Section 1.901-2(g)(2), Income Tax Regs., defines the term
“foreign country” as “any foreign state, any possession of the
United States, and any political subdivision of any foreign state
or of any possession of the United States.”
In Amoco Corp. v. Commissioner, T.C. Memo. 1996-159, an
affiliate of Amoco Corp. (Amoco Egypt) entered into an
arrangement with the Egyptian General Petroleum Corp. (EGPC).
Under the agreement, EGPC assumed and paid tax Amoco owed to the
Egyptian Government on its income. EGPC erroneously claimed a
credit against its Egyptian income taxes for the tax paid on
Amoco Egypt’s behalf. The expiration of the limitations period
barred the Egyptian Government from recovering the tax
erroneously claimed as a credit by EGPC. The Commissioner
asserted that the tax credit claimed by EGPC was an indirect
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