- 43 -
and the Central Bank. Hence, the provisions of section
1.901-2(e)(3), Income Tax Regs., are applicable to the loans, and
the subsidies paid to the Central Bank on behalf of the
borrowers-to-be reduce petitioner’s foreign tax credit. To
conclude, we hold that petitioner’s potential foreign tax credits
for 1984 and 1985 for Brazilian taxes withheld by the Central
Bank are to be reduced by the pecuniary benefit the Central Bank
received with respect to those Brazilian taxes; i.e., petitioner
is entitled to a foreign tax credit of $99,849 ($166,415 -
$66,566) for 1984 and $108,763 ($181,272 - $72,509) for 1985 with
respect to the Brazilian withholding taxes.
To reflect the foregoing and concessions by the parties,
Decision will be entered
under Rule 155.
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