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� 1.901-2. Income, war profits, or excess profits tax
paid or accrued.--(a) Definition of income, war
profits, or excess profits tax--(1) In general. * * *
Whether a foreign levy is an income tax is determined
independently for each separate foreign levy. A
foreign levy is an income tax if and only if--
(i) It is a tax; and
(ii) the predominant character of that tax is
that of an income tax in the U.S. sense.
Except to the extent otherwise provided in
paragraphs (a)(3)(ii) and (c) of this section, a
tax either is or is not an income tax, in its
entirety, for all persons subject to the tax.
* * *
Sec. 1.901-2(a)(1), Income Tax Regs.
Respondent concedes that the OMT is a tax under section
1.901-2(a)(2)(i), Income Tax Regs. However, the parties dispute
whether the "predominant character of the tax is that of an
income tax in the U.S. sense." The regulations describe that
requirement as follows:
(3) Predominant character. The predominant
character of a foreign tax is that of an income tax in
the U.S. sense--
(i) If, within the meaning of paragraph
(b)(1) of this section, the foreign tax is likely to
reach net gain in the normal circumstances in which it
applies * * *
Sec. 1.901-2(a)(3), Income Tax Regs.
Thus, for a tax to be creditable under the regulations, it
must be likely to reach net gain in the normal circumstances in
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