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The parties disagree as to which corporation is the payor of
the ACT and, consequently, disagree as to whether section 902(a)
or 902(b) applies to the dividend received by petitioner during
1992. Petitioners contend that, for foreign tax credit purposes,
the payor of the ACT is the corporation that pays the dividend
and the corresponding ACT. Petitioners further contend that the
subsequent use or allocation of the corporate offset is
irrelevant. Petitioners, therefore, argue that they are entitled
to a foreign tax credit under section 902(a) because, during
1992, petitioner received a dividend from a 10-percent-owned
subsidiary that paid taxes to a foreign government during 1992.
Respondent disagrees with petitioners' contentions and
argues that, for purposes of the foreign tax credit, the payor of
the ACT is the corporation that uses the corporate offset.
Accordingly, respondent argues that the U.K. Subs., rather than
Compaq U.K., must be viewed as the payors of the ACT in 1992.
Respondent further argues that, because the U.K. Subs. did not
pay a dividend to Compaq U.K. during 1992, no portion of the ACT
paid by the U.K. Subs. can be attributed, pursuant to section
902(b), to the dividend distributed in 1992 by Compaq U.K. to
petitioner.
To support their respective positions, both parties rely on
Article 23 of the U.S.-U.K. Convention, which addresses the
foreign tax credit treatment of the ACT. The relevant portion of
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