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Under sections 27(a) and 901, taxpayers may then reduce
their reported regular Federal income tax liability so calculated
by the amount of their foreign tax credits.
In addition to taxpayers’ regular Federal income tax
liability after reduction for foreign tax credits, certain
taxpayers also may be liable for the AMT under section 55(a).
The AMT equals the excess of taxpayers’ so-called tentative
minimum tax liability (TMT) over their regular Federal income tax
liability (after reduction of the latter tax liability for
foreign tax credits). Sec. 55(a), (c)(1).
Significantly, in the calculation of the TMT, sections
55(b)(1)(A) and 59(a)(2)(A) limit taxpayers’ available foreign
tax credits to no more than 90 percent of the taxpayers’ pre-
credit TMT (referred to as the “AMT foreign tax credit”).1
Petitioners acknowledge that, but for the tax treaty between
the United States and the Czech Republic, the above AMT foreign
tax credit limitation available to reduce petitioners’ TMT would
be controlling. Petitioners argue, however, that any such 90-
1 Sec. 59 was added to the Internal Revenue Code by the Tax
Reform Act of 1986, Pub. L. 99-514, sec. 701(a), 100 Stat. 2336,
and sec. 59(a)(2) was deleted from the Internal Revenue Code by
the American Jobs Creation Act of 2004, Pub. L. 108-357, sec.
421(a)(1), 118 Stat. 1514, applicable to tax years beginning
after Dec. 31, 2004. Beginning for 2005, the 90-percent
limitation on taxpayers’ AMT foreign tax credit will no longer
apply, and taxpayers will calculate their AMT foreign tax credit
in substantially the same manner as their regular foreign tax
credit.
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Last modified: May 25, 2011