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40 percent, the amount of the pecuniary benefit before June 28,
1985. After June 28, 1985, petitioner continued to reduce its
amount of claimed foreign tax credits by 40 percent for
withholding taxes claimed on interest payments from Brazilian loans,
even though the pecuniary benefit had been reduced to zero as of
June 28, 1985.
In its amended petition, petitioner asserted, among other
things, that the foreign tax credit otherwise allowable to it for
1980 through 1986 should not be reduced by the pecuniary benefit
provided to Brazilian borrowers.
In the Stipulation Of Settled Issues filed with the Court on
May 30, 1996, the parties agreed:
A. On June 28, 1985, the Brazilian government
effectively eliminated the subsidy/pecuniary benefit
program by reducing the amount of the subsidy from 40% to
zero.
B. On its income tax returns for the taxable years
ended December 31, 1985 and December 31, 1986, Petitioner
reduced the amount of its claimed foreign tax credits for
Brazilian tax on interest paid by Brazilian borrowers by
an amount representing the subsidy/pecuniary benefit,
even though Brazil reduced the subsidy/pecuniary benefit
from 40% to zero on June 28, 1985.
C. To the extent otherwise allowable, Petitioner’s
foreign tax credits for taxes paid after June 28, 1985
through December 31, 1986 are not subject to * * * [any
reduction for a pecuniary benefit]
The total foreign tax credits in dispute between the parties
in connection with the Central Bank’s restructuring debt interest
remittances to petitioner are as follows:
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