118 T.C. No. 11
UNITED STATES TAX COURT
SUNOCO, INC. AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19631-97. Filed March 15, 2002.
P claimed foreign tax credits under sec.
901(a), I.R.C., on its consolidated returns
for 1982, 1983, 1984, and 1986. In these
proceedings, P seeks to change the method of
computing the overall limitation on the credit
imposed by sec. 904(a), I.R.C. Specifically, P
seeks to change the manner in which it allocates
and apportions interest expenses for purposes
of computing taxable income from sources without
the United States, the numerator of the limiting
fraction. P claims that it is entitled to offset
interest income against interest expenses before
it allocates and apportions net interest expenses
under sec. 1.861-8(e)(2), Income Tax Regs.
Held: Sec. 1.861-8(e)(2), Income Tax Regs.,
does not permit P to allocate and apportion net
interest expenses. The Tax Court's decision in
Bowater, Inc., & Subs. v. Commissioner, 101 T.C.
207 (1993), revd. 108 F.3d 12 (2d Cir. 1997),
which holds the opposite, is hereby overruled.
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