Riggs National Corporation & Subsidiaries (f.k.a. Riggs National Bank and Subsidiaries) - Page 2

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                    On its income tax returns for 1980 through 1986, P                
               claimed a foreign tax credit under sec. 901, I.R.C., for               
               the purported withholding tax payments made by the                     
               Central Bank and other Brazilian borrowers on their net                
               loan interest remittances to P.                                        
                    1.   Held:  The withholding tax paid by non-tax-                  
               immune Brazilian borrowers is potentially creditable to                
               P but must be reduced, under sec. 4.901-2(f)(3)(ii),                   
               Temporary Income Tax Regs., 45 Fed. Reg. 75653 (Nov. 17,               
               1980), and sec. 1.901-2(e)(3)(ii), Income Tax Regs., by                
               the pecuniary benefit the borrowers received from the                  
               Brazilian Government.   Nissho  Iwai  Am.  Corp.  v.                   
               Commissioner, 89 T.C. 765 (1987); Norwest Corp. v.                     
               Commissioner, T.C. Memo. 1992-282, affd. 69 F.3d 1404                  
               (8th Cir. 1995); Continental Ill. Corp. v. Commissioner,               
               T.C. Memo. 1988-318, affd. without published opinion sub               
               nom. Citizens & S. Corp. & Subs. v. Commissioner, 919                  
               F.2d 1492 (11th Cir. 1990), affd. in part and revd. in                 
               part 998 F.2d 513 (7th Cir. 1993), followed.                           
                    2.   Held, further:  P is not legally liable for                  
               Brazilian tax on the Brazilian restructuring debt                      
               interest remittances it received from the Central Bank.                
               Under Brazilian law, P was not required to pay Brazilian               
               tax, and neither it nor the Central Bank had a legal                   
               liability to pay the withholding tax. The purported                    
               Central Bank withholding tax payments are not creditable               
               to P because these purported payments were noncompulsory               
               amounts and not a tax to Brazil.  Sec. 1.901-2(e)(1),                  
               (5), Income Tax Regs.                                                  


               Joel V. Williamson, Thomas C. Durham, Scott M. Stewart,                
          Richard M. Timmel, Patricia Anne Flaming, and Kim Marie Boylan, for         
          petitioner.                                                                 
               Theodore J. Kletnick, William G. Merkle, Diane P. Thaler, Paul         
          S. Manning, Rajiv Madan, Mary Ann Amodeo, and Janice E. Lamartine,          
          for respondent.                                                             








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