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III. Subsidy/Pecuniary Benefit Issue
Section 4.901-2(f)(3), Temporary Income Tax Regs., 45 Fed.
Reg. 75653-75654 (Nov. 17, 1980), provides:
(f) Amount of income tax paid or accrued-(1)
In general. A credit is allowed under section 901 for
the amount of income tax * * * that is paid or
accrued to a foreign country, subject to the provisions
of paragraph (f). The amount of income tax paid or
accrued is determined separately for each taxpayer.
* * * * * * *
(3) Subsidies-(i) General rule. An amount is not
income tax paid or accrued to a foreign country to the
extent that-
(A) The amount is used, directly or indirectly, by
the country to provide a subsidy by any means (such as
through a refund or credit) to the taxpayer; and
(B) The subsidy is determined directly or indirectly
by reference to the amount of income tax, or the base
used to compute the income tax, imposed by the country on
the taxpayer.
(ii) Indirect subsidies. A foreign country is
considered to provide a subsidy to a person if the
country provides a subsidy to another person that-
(A) Is owned or controlled, directly or indirectly,
by the same interests that own or control, directly or
indirectly, the first person; or
(B) Engages in a business transaction with the first
person, but only if the subsidy received by such other
person is determined directly or indirectly by reference
to the amount of income tax, or the base used to compute
the income tax, imposed by the country on the first
person with respect to such transaction.
47(...continued)
as the Brazilian Government's agent, then the Central Bank, in
all likelihood, would not receive the pecuniary benefit based on
such "tax payments".
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