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(hereinafter referred to as the 1977 Regulation).
42 Fed. Reg. 1197 (Jan. 6, 1977).
In 1988, the Secretary of the Treasury issued
temporary regulations dealing with the allocation and
apportionment of interest expense and certain other
expenses for purposes of the foreign tax credit rules and
certain other international tax provisions to reflect the
revisions to those rules made by the passage of the Tax
Reform Act of 1986, Pub. L. 99-514, sec. 1215, 100 Stat.
2544. Section 1.861-9T(a), Temporary Income Tax Regs.,
53 Fed. Reg. 35477 (Sept. 14, 1988), superseded the 1977
regulation for years beginning after December 31, 1986.
Section 1.861-9T(a) contains virtually the same language
found in section 1.861-8(e)(2)(i) and (ii) regarding the
allocations and apportionment of interest expenses. In
addition, section 1.861-9T(a), Temporary Income Tax Regs.,
supra, explicitly provides that "the term interest refers
to the gross amount of interest expense incurred by a
taxpayer in a given year." (Emphasis added.) Therefore,
the 1988 temporary regulation explicitly prohibits netting
for tax years beginning after December 31, 1986. The 1988
temporary regulations were not given retroactive effect
and thus do not apply to the years in issue in this case.
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