- 26 -
subsidy that was based on the amount of tax paid. Norwest Corp.
v. Commissioner, 69 F.3d 1404, 1409-1410 (8th Cir. 1995), affg.
T.C. Memo. 1992-282; Continental Ill. Corp. v. Commissioner, 998
F.2d 513, 519-520 (7th Cir. 1993), affg. in part and revg. in
part on another ground T.C. Memo. 1988-318; Riggs I, 107 T.C. at
362. This Court, the U.S. Court of Appeals for the Eighth
Circuit, and the U.S. Court of Appeals for the Seventh Circuit
have held that the regulation is valid and applies to the
Brazilian subsidy at issue here. Norwest Corp. v. Commissioner,
supra at 1408-1410; Continental Ill. Corp. v. Commissioner, supra
at 519-520; Nissho Iwai Am. Corp. v. Commissioner, 89 T.C. 765,
775-777 (1987). Brazil provides the subsidy to a Brazilian
borrower who engages in a business transaction (the loan) with
the U.S. taxpayer lender. The subsidy provided to the Brazilian
borrower is 40 percent of the tax imposed by Brazil on the U.S.
lender’s Brazilian income (the interest paid on the loan), and
thus, the subsidy is measured by that tax.
In Nissho Iwai Am. Corp. v. Commissioner, supra at 777, we
stated:
payment of the tax and receipt of the subsidy are in
lockstep. Commonsense dictates that payment of the tax
and receipt of the subsidy be viewed together in
determining the amount of foreign taxes creditable for
purposes of section 901. If we accept payment of the
Brazilian tax as one transaction and receipt of the
subsidy as another, we would ignore the true unity of
the transaction and elevate form over substance; this
we shall not do.
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011