- 7 -
the remaining 1,597,135,239 shares. The closing of the
transaction occurred at Borden, Inc.'s, offices in New York, New
York, on March 31, 1987.
Petitioner sold Paty because it proved to be an unprofitable
investment, principally due to price controls imposed by the
Brazilian Government. With the exception of the taxable year
ended February 29, 1980, Paty never generated net income for any
year subsequent to MAL's acquisition of an interest in Paty. At
the time of sale, Paty had a net deficit in earnings of
$5,053,076. Neither petitioner nor Damca received any dividends
from Paty.
Damca realized a loss of $3,922,310 upon the sale of its
Paty stock. Of that amount, petitioner reported only $3,772,310
as a loss due to a $150,000 error in calculating losses. On its
U.S. Corporation Income Tax Return (Form 1120) for the taxable
year ended February 29, 1988, petitioner reported the loss as a
U.S. source loss in computing its foreign tax credit limitation.
Respondent determined that the loss from the sale of the Paty
stock must be sourced outside the United States.
OPINION
The sole issue for decision is whether the loss realized by
petitioner on the sale of its Paty stock is to be sourced in the
United States for purposes of determining petitioner's foreign
tax credit limitation under section 904(a).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011