Jacob and Chana Pinson, et al. - Page 8




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          nature of a compulsory income tax under U.S. law.  The same                 
          factual predicate thus applies under both provisions.                       
               Respondent’s notices of deficiency disallowing the credits             
          included statements similar to that in docket No. 19358-98:  “It            
          is further determined that since you have not established that              
          the foreign taxes were paid and/or incurred the credits are not             
          allowed in their entirety.”  Subsequently, the parties stipulated           
          that David Deitsch, Joseph Deitsch, Jacob Pinson, and Rachel                
          Sandman “made the following income tax payments to the State of             
          Israel during the taxable years 1991, 1992 and 1994”, and then              
          listed the corresponding dollar amounts under the heading                   
          “Israeli Income Tax Paid”.  Petitioners apparently, and we                  
          believe reasonably, viewed these stipulations as settling the               
          question of whether the payments were properly characterized as             
          foreign income taxes within the meaning of sections 164 and 901.            
               At the trial which followed submission of the above                    
          stipulations, neither party presented evidence relating to the              
          nature of the taxes paid.  The availability of the section 901              
          credit was litigated on the basis of whether the payments                   
          petitioners received from their Israeli corporation were U.S. or            
          foreign source income.  Considerations of income source can                 
          reduce or eliminate the amount that may be taken as a credit                
          under section 901, see sec. 904(a), but have no bearing on the              
          section 164(a)(3) deduction.  Nonetheless, on brief respondent              






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