116 T.C. No. 3
UNITED STATES TAX COURT
AMERICAN AIR LIQUIDE, INC. AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20381-98. Filed January 16, 2001.
P is the parent of a consolidated group that
includes L. P’s ultimate parent is L’Air, a French
corporation. L’Air pays royalties to P and L under
license agreements for intellectual property owned by P
and L and used by L’Air outside the United States.
P treated the royalty income as sec. 904(d)(1)(I),
I.R.C., general limitation income, relying on the
“reserved” paragraph in sec. 1.904-5(i)(3), Income Tax
Regs.; Article 24(3) of the U.S.-France Treaty, the
capital nondiscrimination provision; and written
statements of Treasury officials.
R determined the royalty income is sec.
904(d)(1)(A), I.R.C., passive income for the purpose of
calculating P’s foreign tax credit.
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