Principal Issues: For the purpose of the foreign tax credit, can the foreign withholding tax considered to be paid by a member of a partnership be something other than a pro-rata amount of the total foreign withholding tax paid by the partnership?
Position: Yes, in certain circumstances. When the amount of foreign withholding tax paid by (i.e., withheld from the payment to) the partnership was computed by reference to each partner’s treaty status with the jurisdiction from which the partnership earned the foreign source income; and the evidence provided demonstrates that the sum of the amounts of foreign withholding tax considered to be paid by each partner does not exceed the amount of foreign tax actually paid by the partnership.
Reasons: The Act permits a foreign tax credit in certain circumstances for an amount of foreign tax paid by a taxpayer. In certain limited situations, the amount paid need not necessarily represent a pro-rata amount.