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To mitigate this potential inequity, article 23(3)(b)
provides special rules for the U.S. determination of the tax owed
and the foreign tax credit. Furthermore, any excessive taxation
that may result, even after these rules are applied, shall be
avoided by treating a portion of the income in question as though
its source was shifted from the United States to Germany so that
further foreign tax credit may be given to the taxpayer by the
United States. See U.S.-Germany treaty, art. 23(3)(c).
Petitioner is a U.S. citizen residing in Germany, and
article 23(3)(c) provides for special measures to avoid potential
double taxation of U.S. citizens. Article 23(3), however, is
applicable only to U.S.-source income. Petitioner's income was
foreign-earned, German-source income. Article 23(3) has no
application to this income or to the tax owed by petitioner to
either Germany or the United States.
Because we find harmony between the AMT limitation of the
foreign tax credit in section 59 and article 23 of the U.S.-
Germany treaty, both may be applied to petitioner. Petitioner is
therefore subject to the AMT on that income he earned while in
Germany.
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