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such as Inland Steel Co. v. United States, 230 Ct. Cl. 314, 677
F.2d 72 (1982); and also by Texasgulf, Inc. v. United States, 17
Cl. Ct. 275 (1989); (2) the OMT is not creditable unless its
predominant character is that of an income tax for each OMT
taxpayer; and (3) for the OMT to be creditable, the processing
allowance must have been intended to compensate for
nonrecoverable expenses. We address each of these contentions
next.
1. Extent To Which This Case Is Governed by Cases Decided
Before the Regulations Were Issued and by Texasgulf,
Inc. v. United States
a. Preamble to the 1983 Regulations
Respondent contends that the OMT is not creditable because
it fails to meet standards of creditability applied in cases
decided before the regulations were issued. Respondent contends
that the Preamble to section 1.901-2, Income Tax Regs., shows
that the regulations adopted prior case law. We disagree; the
preamble does not support respondent’s broad use of the
preregulation cases.
The preamble to the final regulations under section 901,
T.D. 7918, 1983-2 C.B., 113, 114, states in part:
Under these final regulations, the predominant
character of a foreign tax is that of an income tax in
the U.S. sense if the foreign tax is likely to reach
net gain in the normal circumstances in which it
applies. This standard, found in �1.901-2(a)(3)(i),
adopts the criterion for creditability set forth in
Inland Steel Company v. U.S., 677 F.2d 72 (Ct. Cl.
1982), Bank of America National Trust and Savings
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