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business transactions. No bona fide business is implicated here,
and we are not persuaded that Congress intended to encourage or
permit a transaction such as the ADR transaction, which is merely
a manipulation of the foreign tax credit to achieve U.S. tax
savings.
Finally, petitioner asserts that the enactment of section
901(k) by the Taxpayer Relief Act of 1997, Pub. L. 105-34, sec.
1053(a), 111 Stat. 941, also indicates that Congress did not
intend for the economic substance doctrine to apply under the
facts of this case. Section 901(k)(1) provides that a taxpayer
must hold stock (or an ADR) for at least 16 days of a prescribed
30-day period including the dividend record date, in order to
claim a foreign tax credit with respect to foreign taxes withheld
at the source on foreign dividends. If the taxpayer does not
meet these holding requirements, the taxpayer may claim a
deduction for the foreign taxes paid if certain other
requirements are met.
Section 901(k) does not change our conclusion in this case.
That provision was passed in 1997 and was effective for dividends
paid or accrued after September 4, 1997. The report of the
Senate Finance Committee indicates that "No inference is intended
as to the treatment under present law of tax-motivated
transactions intended to transfer foreign tax credit benefits."
S. Rept. 105-33, 175, 177 (1997). A transaction does not avoid
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