Amoco Corp., et al. v. Commissioner
United States Tax Court
TC Memo 1996-159 (1996)
Amoco Egypt (AE) (plaintiff) owed income taxes in Egypt. The Egyptian General Petroleum Corporation (EGPC) paid the taxes that AE owed in Egypt. Under Egyptian law, EGPC was required to pay any yearly surpluses to the Egyptian government. AE filed tax returns in the United States, claiming a foreign tax credit in the amount equal to the taxes that EGPC paid on AE’s behalf in Egypt. The Internal Revenue Service (IRS) (defendant) issued a deficiency notice to AE, asserting that AE was not entitled to a foreign tax credit and thus owed more taxes in the United States. AE petitioned for judicial review of the deficiency notice, arguing that the foreign tax credit should not have been disallowed because EGPC was, in effect, the same as the Egyptian government in that EGPC was required to turn over EGPC’s annual surpluses to the Egyptian government. AE claimed that the foreign tax credit was permissible because EGPC, as the functional equivalent to the Egyptian government, received no benefit from paying AE’s taxes in Egypt. The IRS argued that AE was not entitled to the foreign tax credit because EGPC was a separate legal entity, because EGPC benefited by taking the tax credit against EGPC’s tax liability in Egypt, and because EGPC indirectly subsidized AE’s tax liability in Egypt.
Rule of Law
Holding and Reasoning (Tannenwald, J.)
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