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for 1985 before June 1985 with respect to those interest
remittances.
On its 1980 through 1986 income tax returns, petitioner
generally reported its interest income and withholding tax
payments with respect to its Brazilian loans on a cash basis.
Petitioner claimed a foreign tax credit and reported grossed-up
interest income. On its returns covering the period from 1980
through June 28, 1985, petitioner reduced the amount of foreign
tax credit it claimed in connection with its Brazilian loans by
an amount equal to the pecuniary benefit provided by the
Brazilian Government to Brazilian borrowers.
In its amended petition, petitioner asserted, among other
things, that the foreign tax credit for Brazilian taxes withheld
by the Central Bank otherwise allowable to it for 1980 through
1986 should not be reduced by the pecuniary benefit provided to
Brazilian borrowers.
OPINION
As relevant here, sections 901(b) and 903 permit a domestic
corporation to receive a tax credit in the amount of any income
tax, or any tax paid in lieu of a tax on income, that is paid or
accrued during the taxable year to a foreign country. A foreign
levy is a tax if it requires a compulsory payment pursuant to the
authority of a foreign country to levy taxes. Sec.
1.901-2(a)(2)(i), Income Tax Regs. Credit is not allowed,
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