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disallow foreign tax credits in certain situations where a
government owned entity assumed a U.S. taxpayer's foreign tax
liability. In this connection, it is at least arguable that just
as the presence of a specific exception in the regulations in
Qantas Airways Ltd. v. United States, supra, saved the day for
respondent, its absence produces the opposite result herein. The
reasoning of the Court of Appeals in State of Michigan v. United
States, supra, which reflects an unwillingness to carve out an
exception to a general statutory provision, in the absence of
evidence of specific intent to that effect, lends support to this
view. Compare Larson v. Commissioner, 66 T.C. 159, 185 (1976),
where we applied regulations, establishing criteria for
determining whether an organization was a partnership or a
corporation, as they were written but recognized that respondent
might have prevailed if the regulatory power had been exercised
to its full extent.
Respondent insists that Example (3) was intended to be
confined to the establishment of an equivalence between gross
transactions (where the U.S. taxpayer receives the income and is
liable for and pays the foreign income tax directly) and net
transactions (where the U.S. taxpayer receives the income net of
the taxes otherwise owed to the foreign government). Respondent
urges us to recognize that the application of Example (3) to the
situation herein goes beyond the net transaction situation.
Respondent's position is based on the premise that EGPC should
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