Nissho Iwai American Corp. v. Commissioner
United States Tax Court
89 T.C. 765 (1987)

- Written by Alex Ruskell, JD
Facts
Nissho Iwai American Corp. (Nissho) (plaintiff) entered into a loan agreement with Companhia Nipo-Brasileira de Pelotizacao-Nibrasco (Nibrasco). The agreement was a net loan, which meant that any payments of principal and interest under the loan were made net of any applicable foreign taxes. Brazil provided a subsidy to Brazilians borrowing from foreign lenders. Thus, Nibrasco automatically received a tax credit as a subsidy the moment Nibrasco paid its relevant taxes on the loan. Under Brazilian law, the Brazilian borrower was the person required to pay the tax on the foreign lender’s behalf, but such tax was potentially creditable to the lender. Nissho sued the tax commissioner (defendant), claiming it was entitled to foreign tax credits despite the subsidy. Temporary tax regulations were in effect during the time in question.
Rule of Law
Issue
Holding and Reasoning (Jacobs, J.)
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