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for credit, regardless of whether the credit claimed is for foreign
tax paid or foreign tax accrued, but that the provisional or interim
credit will be subject to adjustment if that withheld foreign tax
is not actually paid to the foreign taxing authority);14 Norwest
Corp. v. Commissioner, T.C. Memo. 1995-453.
Section 1.905-2(a)(1), Income Tax Regs., mandates that tax
credit claims made by corporations for foreign taxes be accompanied
by Form 1118, Computation of Foreign Tax Credit--Corporations.
Section 1.905-2(a)(2), Income Tax Regs., provides, in pertinent
part:
Except where it is established to the
satisfaction of the district director that it
is impossible for the taxpayer to furnish such
evidence, the form must have attached to it (i)
the receipt for each such tax payment if credit
is sought for taxes already paid, or (ii) the
return on which each such accrued tax was based
if credit is sought for taxes accrued.
Section 1.905-2(b), Income Tax Regs., provides for the use of
secondary evidence if a receipt or direct evidence of the amount of
tax withheld at the source cannot be supplied for taxes already
paid. Thus, pursuant to section 1.905-2(b), Income Tax Regs., while
taxpayers in the first instance must submit direct evidence of
14 However, as the Court of Appeals for the Seventh
Circuit noted in Continental Ill. Corp. v. Commissioner, 998 F.2d
513, 516 (7th Cir. 1993), affg. in part and revg. in part T.C.
Memo. 1991-66, where a net loan arrangement is involved and no
funds are ever paid over to the foreign taxing authority by the
borrower, difficulty exists in positing that there was a
“withholding” of funds inasmuch as there is no subtraction of
funds due and payable to the U.S. lender.
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