Final Regs Tweak Safe Harbor for Partnership Allocations of Creditable Foreign Tax Expenditures

September 30, 2011

The final regulations—

clarify the effect of Code Sec. 743(b) adjustments on the determination of net income in a CFTE category;
include special rules regarding how deductible allocations (that is, allocations that give rise to a deduction under foreign law) are taken into account for purposes of determining net income in a CFTE category;
include special rules regarding how nondeductible guaranteed payments (that is, guaranteed payments that do not give rise to a deduction under foreign law) are taken into account for purposes of determining net income in a CFTE category; and
include a clarification of the rules regarding the treatment of disregarded payments between branches of a partnership for purposes of determining income attributable to an activity included in a CFTE category.

A transition rule applies to partnerships whose agreements were entered into before February 14, 2012.