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Substantially identical provisions are made in section 1.901-
2(e)(3), Income Tax Regs.
Pursuant to section 4.901-2(f)(3)(ii), Temporary Income Tax
Regs., supra, and section 1.901-2(e)(3)(ii), Income Tax Regs., the
existence of an indirect subsidy does not depend upon a finding
that the U.S. taxpayer derived an actual economic benefit. It is
sufficient that another person who engages in a transaction with
the U.S. taxpayer has received a subsidy that was based on the
amount of tax paid. Norwest Corp. v. Commissioner, 69 F.3d at
1409-1410; Continental Ill. Corp. v. Commissioner, 998 F.2d at
519-520; Bankers Trust New York Corp. v. United States, 36 Fed. Cl.
30 (1996). Thus, subsidies received by Resolution 63 repass lenders
and repass borrowers also fall "within the letter as well as the
spirit of" the indirect subsidy provision of the temporary and
final regulations, as the repass lender is required by Brazilian
law to pass along the pecuniary benefit to the repass borrowers.
Norwest Corp. v. Commissioner, 69 F.3d at 1410; Continental Ill.
Corp. v. Commissioner, 998 F.2d at 520, affg. on this issue T.C.
Memo. 1988-318; Bankers Trust New York Corp. v. United States,
supra at 36. Further, this Court and other courts, including the
U.S. Courts of Appeals for the Seventh and Eighth Circuits, have
upheld the validity of the indirect subsidy provision of the
temporary regulations, and have held that U.S. taxpayer-lenders
are required to reduce the amount of their potentially creditable
Brazilian withholding taxes by the pecuniary benefit the Brazilian
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