Treasury and IRS Address Foreign Tax Credit, Partnership Transactions
"As we discussed in Notice 2004-19, we will use all of the tools available to us to address inappropriate foreign tax credit transactions," said Acting Assistant Secretary for Tax Policy Greg Jenner. "Allocations by partnerships of foreign taxes without the corresponding income do not give rise to the double taxation that is the economic basis for the foreign tax credit. These types of allocations should not be allowed."
The temporary regulations generally apply to taxable years beginning on or after today. No inference is intended as to the treatment of partnership allocations of foreign taxes under the existing regulations.