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instrumentality, the Central Bank, and, thus, in accordance with
Amoco and section 1.901-2(f)(2)(ii), Example (3), Income Tax
Regs., the foreign tax credit should not be reduced.
Paragraph (f) of section 1.901-2, Income Tax Regs.,
“contains rules for determining by whom foreign tax is paid.”
Sec. 1.901-2(a)(1), Income Tax Regs. Section 1.901-2(f), Income
Tax Regs., provides in pertinent part:
(f) Taxpayer--(1) In general. The person by whom
tax is considered paid for purposes of sections 901 and
903 is the person on whom foreign law imposes legal
liability for such tax, even if another person (e.g., a
withholding agent) remits such tax. * * *
(2) Party undertaking tax obligation as part of
transaction--(i) In general. Tax is considered paid by
the taxpayer even if another party to a direct or
indirect transaction with the taxpayer agrees, as a
part of the transaction, to assume the taxpayer’s
foreign tax liability. The rules of the foregoing
sentence apply notwithstanding anything to the contrary
in paragraph (e)(3) of this section. See � 1.901-2A
for additional rules regarding dual capacity
taxpayers.[11]
(ii) Examples. The provisions of paragraphs
(f)(1) and (f)(2)(i) of this section may be illustrated
by the following examples:
Example (1). Under a loan agreement between A, a
resident of country X, and B, a United States person, A
11A “dual capacity taxpayer” is a person who is subject to a
levy of a foreign state and who also, directly or indirectly,
receives a specific economic benefit from the state or an
instrumentality of the state. Sec. 1.901-2(a)(2)(ii)(A), Income
Tax Regs. Specific economic benefits are economic benefits that
foreign governments do not make available on substantially the
same terms to substantially all persons subject to the generally
imposed income tax, e.g., a concession to extract government-
owned petroleum. Sec. 1.901-2(a)(2)(ii)(B), Income Tax Regs.
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