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JACOBS, Judge: Respondent determined deficiencies in the
Federal income tax of petitioner Riggs National Corporation &
Subsidiaries, formerly known as Riggs National Bank and
Subsidiaries.
The dispute involves petitioner's entitlement to foreign tax
credit under section 9011 for Brazilian taxes withheld on interest
income petitioner received, during the years 1980 through 1986, as
a result of its loans to Brazilian borrowers. The primary issues
for decision are as follows: (1) Whether petitioner is legally
liable for the Brazilian withholding tax purportedly paid by its
Brazilian borrowers on their net loan interest remittances to
petitioner (the legal liability issue); (2) whether the alleged
withholding tax paid by the Banco do Central Brazil (Central Bank)
on its Brazilian restructuring debt interest remittances to
petitioner is a noncompulsory amount and thus not a tax to Brazil
(the Central Bank issue); and (3) whether a subsidy, equal to a
percentage of the tax withheld, that borrowers received from the
Brazilian Government during the period from January 1, 1980,
through June 28, 1985, reduces the amount of foreign tax credit
allowable to petitioner (the subsidy/pecuniary benefit issue).
To a major extent, the legal liability and subsidy/pecuniary
benefit issues have been previously dealt with in Norwest Corp. v.
1 Unless otherwise indicated, all statutory references
are to the Internal Revenue Code in effect for the years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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