American Air Liquide, Inc. and Subsidiaries - Page 1

                                   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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