Sunoco, Inc. and Subsidiaries - Page 1

                                   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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