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comptroller on the foreign tax credit to be claimed with respect to
a January 1987 phase III DFA interest remittance, petitioner’s
International Division stated that a Brazilian tax rate of “60% of
25%” had been applied to the grossed-up January 1987 phase III DFA
interest payment.
J. Foreign Tax Credits in Dispute on Remand
On its income tax returns, petitioner generally reported its
interest income and withholding tax payments with respect to its
Brazilian loans on a cash basis. Petitioner claimed a foreign tax
credit and reported interest income gross-up when it received a
DARF. On its returns (including those for 1980 through 1986, which
were the years originally in issue in this case), petitioner reduced
the amount of the foreign tax credit it claimed in connection with
its Brazilian loans by the pecuniary benefit provided by the
Brazilian Government to Brazilian borrowers.
On its returns covering the period from January 1, 1980,
through June 28, 1985, petitioner reduced the amount of its claimed
foreign tax credits attributable to Brazilian loans by an amount
equal to the pecuniary benefit available to Brazilian borrowers.
Petitioner made this reduction in its claimed foreign tax credits
for both nonrestructured and restructured Brazilian loans.
On its returns covering the period after June 28, 1985, through
at least January 1987, petitioner continued to reduce its amount of
claimed foreign tax credits attributable to Brazilian net loans by
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