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subsidy to Amoco Egypt that reduced the amount of Amoco Egypt’s
creditable foreign tax payments.
This Court held, and the U.S. Court of Appeals for the
Seventh Circuit agreed, that Amoco Egypt’s foreign tax credit was
not to be reduced by EGPC’s tax credit, because the transaction
between Amoco Egypt and EGPC complied with the terms of section
1.901-2(f)(2)(ii), Example (3), Income Tax Regs., and, thus, was
specifically exempted from the subsidy rules of section 1.901-
2(e)(3), Income Tax Regs. In reaching this holding, we concluded
that, for purposes of applying section 1.901-2(f)(2)(ii), Example
(3), and (g)(2), Income Tax Regs., EGPC was to be considered part
of the Egyptian Government, notwithstanding that EGPC was a
separate legal entity under Egyptian law.12
The fact that a governmental instrumentality may be treated
as part of the government with respect to certain matters does
not necessarily mean that the instrumentality will be treated as
such in all circumstances. Compare Lebron v. Natl. R.R.
Passenger Corp., 513 U.S. 374 (1995), where the Supreme Court
held that the National Railroad Passenger Corporation, commonly
12In affirming our decision, the U.S. Court of Appeals for
the Seventh Circuit specifically focused on “the twin facts that
EGPC is an instrumentality of the Egyptian government (though not
"the country" itself) and that it was the sole entity that
received the benefit of the (erroneous) tax credit.” Amoco v.
Commissioner, 138 F.3d 1139, 1148 (7th Cir. 1998), affg. T.C.
Memo. 1996-159. The Court of Appeals found it “clear that any
benefit to EGPC is a benefit to the government of Egypt, and vice
versa”. Id.
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