Amoco Corporation (Formerly Standard Oil Company (Indiana) and Affiliated Corporations - Page 94

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          Commissioner, 998 F.2d 513 (7th Cir. 1993), affg. in part and               
          revg. in part T.C. Memo. 1991-66, affg. T.C. Memo. 1989-636, and            
          affg. in part and revg. in part T.C. Memo. 1988-318, and Norwest            
          Corp. v. Commissioner, T.C. Memo. 1992-282, affd. 69 F.3d 1404              
          (8th Cir. 1995), are inapplicable for the same reasons.                     
               Respondent's reliance on the regulations under section                 
          901(i), and the background material of those regulations, is also           
          misplaced.  Section 901(i) was added to the Code in 1986, to                
          codify the subsidy rules in section 1.901-2(e)(3), Income Tax               
          Regs.  See H. Conf. Rept. 99-841 (1986), 1986-3 C.B. (Vol. 4) 1,            
          593; S. Rept. 99-313 (1986), 1986-3 C.B. (Vol. 3) 1, 325; H.                
          Rept. 99-426 (1985), 1986-3 C.B. (Vol. 2) 1, 352.                           
               The background material, cited by respondent, provides:                
                    Special treatment for government (or government-                  
               owned) entities also was rejected because it would                     
               create the potential for a credit to be claimed for a                  
               tax nominally paid by or on behalf of a U.S. person                    
               when the substance of the transaction with a government                
               entity was to grant a tax holiday to the U.S. taxpayer.                
               This is especially true in the case of a transaction                   
               with a government entity that pays taxes: where a tax                  
               holiday for the U.S. taxpayer is intended, the                         
               government entity could simply assume a tax liability                  
               that was nominally borne by the U.S. person and receive                
               a tax credit against its own liability in the amount of                
               the tax nominally paid on the U.S. person's behalf.                    
               * * * [T.D. 8372, 1991-2 C.B. 338.]                                    
               Example (4) of section 1.901-2(e)(3)(iv), Income Tax Regs.             
          (1991), discusses a situation very similar to the one herein,               
          providing that a credit to a State petroleum authority for a                
          portion of the income taxes paid by it on behalf of a U.S.                  





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