Source: https://www.lexisnexis.com/legalnewsroom/tax-law/b/stateandlocaltaxation/archive/2012/08/30/foreign-tax-credit-partnerships-and-disregarded-entities-the-latest-rules.aspx?Redirected=true
Timestamp: 2017-01-21 06:48:41
Document Index: 665857995

Matched Legal Cases: ['§ 12', '§ 1', '§ 1', '§ 1', '§ 1', '§ 301', '§ 1']

FTT Legislation May Be Drafted Within Months, Says Maltese Official
IRS Moves to Curtail Cross-Border Partnership Transfers
12:39 PM Author: Rufus Rhoades
[Editor's Note: This narrative is derived from Rhoades & Langer, U.S. International Taxation and Tax Treaties, § 12.02[3][a][ii][B] (Matthew Bender). Available also in print at the LexisNexis® Store.]
The foreign tax credit is the international taxpayer's chief defense against double taxation of the same items of income, once by the foreign jurisdiction and once by the United States.
A partnership is considered to pay whatever foreign tax is imposed on the partnership entity by the foreign country. [Treas. Reg. § 1.901-2(f)(4)(i).] The partnership regulations [Treas. Reg. § 1.702-1(a)(6) and § 1.704-1(b)(4)(vii)] set forth the rules for allocating foreign tax paid by a partnership among partners. Under those regulations, the partner is to take into consideration his distributive share of the taxes paid by the partnership. The election to treat taxes as a deduction is made at the partner level. [Treas. Reg. § 1.702-1(a)(6).]
Foreign law will apply the foreign tax at the entity level when the entity is recognized as a tax paying entity under foreign law, even if it is a disregarded entity (generally, a "DE") under U.S. law. [ Treas. Reg. § 301.7701-2(c)(2)(i).] Under those circumstances, the person that is treated as owning the assets of the DE is considered as legally obligated to pay the foreign tax for U.S. tax purposes. [ Treas. Reg. § 1.901-2(f)(4)(ii).]