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interest remittances to petitioner during the relending periods of
the DFA's and CGA's. Petitioner is thus not "legally liable" for
these alleged Central Bank "withholding tax payments". Nissho Iwai
Am. Corp. v. Commissioner, 89 T.C. at 773-774; sec. 1.901-2(f),
Income Tax Regs.; see the PeMex case.
II. Central Bank Issue
Our holding on the Central Bank/liability issue requires us to
decide the Central Bank issue against petitioner. As petitioner is
not "legally liable" for the Brazilian tax, we hold that the
"withholding tax" purportedly paid by the Central Bank on its
restructuring debt interest remittances to petitioner is a
noncompulsory amount and not a tax to Brazil under section 1.901-
2(e)(5), Income Tax Regs., and is not creditable to petitioner.
Sec. 1.901-2(e)(1), Income Tax Regs. Petitioner has not argued
that, even if these alleged withholding tax payments were not
required and exceed the amount of petitioner's actual Brazilian tax
liability, they are still potentially creditable to petitioner
pursuant to section 1.901-2(e)(5)(i), Income Tax Regs.46 We do not
46 The regulations provide relief, in certain limited
circumstances, to taxpayers who reasonably interpret foreign law
but overpay their actual foreign tax liability. Among other
things, the amount of foreign tax paid must be determined by the
taxpayer in a manner that is consistent with a reasonable
interpretation and application of the substantive and procedural
provisions of foreign law. Further, an interpretation of foreign
law is not considered reasonable if there is actual or
constructive notice (e.g., a published court decision) to the
taxpayer that the interpretation is likely erroneous. Also,
while a taxpayer generally may rely on advice obtained in good
faith from competent foreign tax advisers, the taxpayer must have
(continued...)
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