Compaq Computer Corporation and Subsidiaries - Page 19




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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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