US taxes for an LLC are not FAT even if the LLC actually pays the tax

CRA’s policy that US tax paid by the Canadian shareholder on the income (which also is foreign accrual property income) of an LLC does not qualify as foreign accrual tax, applies even where it is arranged for the LLC to actually makes those tax payments to the IRS.  However, where the Canadian shareholder was a corporation, a deduction under s. 113(1)(c) would be available to it in respect of the US tax paid by it where a dividend distribution out of taxable surplus was received by it.

Neal Armstrong.  Summary of 2013 STEP Round Table, Q. 6, 2013-0480321C6 under s. 95(1) – FAT.