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significant costs or expenses. Sec. 1.901-2(b)(4) (flush
language), Income Tax Regs. Petitioner prevails if the OMT meets
one or more of these net income requirements.
A recap may be helpful. The task of deciding whether the
predominant character of the OMT is that of an income tax in the
U.S. sense is simplified because the terms and clauses in the
regulations just described tie the "predominant character"
inquiry to several specific tests. To summarize, for a tax to be
creditable:
1. Its predominant character must be that of an income tax
in the U.S. sense. Sec. 1.901-2(a)(1)(ii), Income Tax Regs.
2. Its predominant character is that of an income tax in
the U.S. sense if it is “likely to reach net gain in the normal
circumstances in which it applies”. Sec. 1.901-2(a)(3)(i),
Income Tax Regs.
3. It is likely to reach net gain in the normal
circumstances in which it applies if and only if the tax, judged
on the basis of its predominant character, meets (among other
requirements) the net income requirement. Sec. 1.901-2(b)(1),
Income Tax Regs.
4. It meets the net income requirement if, judged on the
basis of its predominant character,5 it meets one of three tests.
5To borrow a phrase, the "reader by now has divined that
'predominant character' is the leitmotif of the 1983
(continued...)
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