- 5 -
favorable to the nonmoving party. See Bond v. Commissioner, 100
T.C. 32, 36 (1993); Naftel v. Commissioner, 85 T.C. 527, 529
(1985).
The parties agree that for the purpose of deciding these
cross-motions there are no genuine issues of material fact and
that the Court may decide the issue as a matter of law. Hence,
this case is ripe for summary judgment.
B. Characterization of Royalty Income
The determination of the proper characterization of the
royalty income requires an analysis of the following provisions:
(1) Section 904, (2) section 1.904-5, Income Tax Regs., and (3)
Article 24(3) of the Convention With Respect to Taxes on Income
and Property, July 28, 1967, U.S.-Fr., T.I.A.S. 6518, as amended
by Supplementary Protocols, Oct. 12, 1970, T.I.A.S. 7270; Nov.
24, 1978, T.I.A.S. 9500; Jan. 17, 1984, T.I.A.S. 11096; and June
16, 1988, T.I.A.S. 11967 (U.S.-France Treaty).
1. Statutory Background
Pursuant to section 904(a), the amount of foreign tax credit
allowable under section 901 may not exceed the same proportion of
the tax against which such credit is claimed which the taxpayer’s
taxable income from sources without the United States bears to
its entire taxable income for the same taxable year. See sec.
904(a). Under section 904, the allowable foreign tax credit is
computed separately for each of the categories or baskets of
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