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reduce petitioner’s foreign tax credits for those Brazilian
taxes. Indeed, in Riggs I, 107 T.C. at 363, we stated: “we need
not reach the issue of whether any pecuniary benefit the Central
Bank received represents an indirect subsidy for purposes of
section 1.901-2(e)(3)(ii), Income Tax Regs.”; we made a similar
statement in Riggs III.
Petitioner bears the burden of proof. On the basis of the
record herein, we conclude that petitioner has failed to
establish that the Central Bank during 1984 and 1985 did not in
fact receive a pecuniary benefit.
Until June 28, 1985, the pecuniary benefit provided to
Brazilian borrowers with foreign loans had been equal to 40
percent of the withheld Brazilian tax on their foreign loan
interest remittances. The March 1984 ruling specifically
provided that the pecuniary benefit applied to taxes withheld by
the Central Bank on behalf of the borrowers-to-be, and the
schedules attached to the DARFs issued by the Central Bank
reported that the Central Bank received a 40-percent pecuniary
benefit with respect to those Brazilian taxes withheld and paid
by the Central Bank from 1984 through June 28, 1985.10 Since the
10In Riggs III, we gave no weight to the schedules because
they reported that the Central Bank continued to receive a
pecuniary benefit equal to 40 percent of the withholding tax
imposed on post-June 28, 1985, interest remittances. In Riggs
IV, 295 F.3d at 20-22, the Court of Appeals opined that, at best,
the schedules reflected clerical errors; at worst, they reflected
(continued...)
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