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Association v. U.S., 459 F.2d 513 (Ct. Cl. 1972), and
Bank of America National Trust and Savings Association
v. Commissioner, 61 T.C. 752 (1974). The regulations
set forth three tests for determining if a foreign tax
is likely to reach net gain: the realization test, the
gross receipts test, and the net income test. All of
these tests must be met in order for the predominant
character of the foreign tax to be that of an income
tax in the U.S. sense.
The preamble states that the regulations adopt the
creditability criterion from certain cases to use in deciding
whether the predominant character of a foreign tax is likely to
reach net gain for purposes of section 1.901-2(a)(3)(i), Income
Tax Regs. The preamble states that a tax is likely to reach net
gain if it meets three tests provided in the regulations. The
regulations provide objective and quantitative standards that
were not used in cases which decided creditability of foreign
taxes before the regulations became final. Regulations can
supersede prior case law to the extent that they provide
requirements and definitions not found in prior case law. See
Bowater Inc. v. Commissioner, 101 T.C. 207, 212 (1993); Nissho
Iwai American Corp. v. Commissioner, 89 T.C. 765, 776-777 (1987).
b. Inland Steel Co. v. United States and
Texasgulf, Inc. v. United States
Respondent contends that Inland Steel Co. v. United States,
supra, and Texasgulf, Inc. v. United States, supra, establish as
a matter of law that the OMT is not creditable. We disagree with
respondent’s contention that either of those cases decided the
issue before us here.
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