Document Type
Article
Publication Date
10-2024
Abstract
In Varian Medical Systems, the Tax Court held in a unanimously reviewed opinion that the taxpayer was entitled to take a section 245A deduction for an amount treated as a dividend under section 78. Section 78 provides that deemed paid foreign taxes are treated as dividends received for foreign tax credit purposes, thus grossing up the amount of the dividend by the foreign taxes attributable to it before granting the FTC. This provision is needed because otherwise the taxpayer would enjoy both a deduction and a credit for the same foreign tax. Section 245A, however, eliminates the tax on the amount eligible for the dividends received deduction so that the section 78 gross-up is not needed and should not be a dividend for section 245A purposes. But Congress made a mistake in setting the effective dates so that, for 2018, the text of the statute permits the section 78 gross-up to be a dividend for section 245A purposes. The IRS responded by modifying reg. section 1.78-1 in 2019 to state
Recommended Citation
Avi-Yonah, Reuven S. "The Triumph of Tax Textualism." Tax Notes International 116, no. 2 (2024): 261-265.
Comments
Reprinted with the permission of Tax Analysts.