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opinion 538 F.2d 334 (9th Cir. 1976). In Bank of America Natl.
Trust & Sav. Association v. United States, 198 Ct. Cl. 263, 459
F.2d 513, 523 (1972), the U.S. Court of Claims concluded that an
income tax for purposes of section 901(b):
covers all foreign income taxes designed to fall on
some net gain or profit, and includes a gross income
tax if, but only if, that impost is almost sure, or
very likely, to reach some net gain because costs or
expenses will not be so high as to offset the net
profit. [Fn. ref. and citation omitted.]
B. Section 1.901-2, Income Tax Regs.
Respondent proposed regulations under section 901 in 1979,
sec. 1.901-2, Proposed Income Tax Regs., 44 Fed. Reg. 36071
(June 20, 1979), and issued temporary regulations in 1980, sec.
4.901-2, Temporary Income Tax Regs., 45 Fed. Reg. 75647 (Nov. 17,
1980); see Phillips Petroleum Co. v. Commissioner, 104 T.C. 256,
285 (1995)(construing these temporary regulations). On April 5,
1983, respondent issued new proposed regulations. Sec. 1.901-2,
Proposed Income Tax Regs., 48 Fed. Reg. 14640 (Apr. 5, 1983).
The regulations under section 901, section 1.901-2, Income Tax
Regs., were adopted on October 12, 1983. T.D. 7918, 1983-2 C.B.
113. The parties do not dispute that the regulations apply to
petitioner for the years in issue.
To understand how the regulations apply here, we must
consider a series of defined terms and phrases in the
regulations. We begin with the definition of income tax. The
regulations define income tax as follows:
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