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being "In accordance with the provisions and subject to the
limitations of the law of the United States." In Biddle v.
Commissioner, 302 U.S. 573, 382-383 (1938), the Supreme Court
articulated the rule that, for U.S. foreign tax credit purposes,
the taxpayer is the party who is liable for and charged with the
payment of tax. That mandate has been incorporated into the
regulations at section 1.901-2(f)(1), Income Tax Regs. In the
instant case, the ACT is levied on the corporation that pays the
dividend, regardless of whether that corporation or its
subsidiary will make use of the corporate offset. Accordingly,
it is appropriate to consider the corporation that actually pays
the dividend, and that is liable for payment of the ACT, as the
payor of the ACT for foreign tax credit purposes regardless of
the use of the corresponding U.K. credit.7
7 Respondent has further argued that, by disregarding the
corporate offset in determining the payor of the ACT for foreign
tax credit purposes, a U.K. corporation which is a subsidiary of
a U.S. corporation could, theoretically, receive a dividend from
one of its 10th-level subsidiaries. Pursuant to the Income and
Corporation Taxes Act, 1988, sec. 247, that 10th-level subsidiary
could choose not to pay ACT on that dividend. The U.K.
subsidiary could then in turn remit that dividend to its U.S.
parent, pay the ACT, and allocate the corporate offset to the
10th-level subsidiary. The U.S. parent could then claim a
foreign tax credit for the ACT paid by its U.K. subsidiary,
notwithstanding that, had the ACT been paid by the 10th-level
subsidiary, the ACT would not be creditable pursuant to the
limitation of sec. 902(b). Respondent's hypothetical is not
based upon the facts of the instant case, and we decline to rule
on it.
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