Texasgulf, Inc. v. Commissioner
United States Tax Court
107 T.C. 51 (1996)
- Written by David Bloom, JD
Facts
Texasgulf, Inc. (plaintiff), a mining operator, paid a foreign tax called the Ontario Mining Tax (OMT). Texasgulf claimed a foreign tax credit against Texasgulf’s federal income taxes in the United States for having paid the OMT. The Internal Revenue Service (IRS) (defendant) issued a deficiency notice to Texasgulf. The IRS asserted that Texasgulf was not entitled to the foreign tax credit because the OMT was not an income tax as defined in the applicable Treasury regulations. Texasgulf filed a petition for judicial review of the deficiency notice, arguing that the OMT was creditable because the OMT met the net-income requirement under the Treasury regulations. Texasgulf relied on the testimony of an expert who reviewed a broad sample of representative data for OMT tax returns filed by other mining operators in Ontario over the span of several years. Texasgulf’s expert testified that the combined processing allowances claimed by the sample OMT taxpayers, and the vast majority of all OMT taxpayers, far exceeded nonrecoverable expenses. The IRS’s expert agreed with Texasgulf’s expert’s findings but opined that the nonrecoverable expenses were so significant that the OMT did not meet the net-income test for the OMT to be considered a creditable tax.
Rule of Law
Issue
Holding and Reasoning (Colvin, J.)
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