Hello @Mike9241 , yes those were the days when pub 17 was only a few pages and easy to digest. While I am not familiar with the case that you mention, I would suggest that the decision was based on ...
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Hello @Mike9241 , yes those were the days when pub 17 was only a few pages and easy to digest. While I am not familiar with the case that you mention, I would suggest that the decision was based on " a taxpayer cannot take any action/steps/claims if it were ONLY with the purpose of avoiding a tax " -- in this case avoiding AMT.
My contention that you can choose to claim a reduced amount of Foreign Tax are based on :
(1) there is nothing in the code that says you have to recognize any Foreign Taxes paid -- thus it assumes that the taxpayer would do everything legal to reduce the tax burden. The tax treaties themselves generally provide a path to reduce double taxation burden by requiring the contracting states to provide tax relief through foreign tax credit ( full amount paid) and US chooses to recognize the full amount CLAIMED but allows amount limited to lesser of amount claimed/paid and allocated US tax on the same doubly taxed foreign source income. But there is nothing that says a taxpayer must recognize the tax treaty or claim FTC
(2) the code actually uses " if taxpayer chooses..." regarding claiming Foreign Taxes paid
" 26 USC 901 --
"(a) Allowance of credit If the taxpayer chooses to have the benefits of this subpart, the tax imposed by this chapter shall"
(3) it cautions the taxpayer that by choosing to use the "simplified / safeharbor" amount of US$300 per filer, taxpayer cannot carryback/forward -- suggesting that the writers of the code did envisage that some taxpayers may claim an amount less than actual paid of Foreign Taxes and so wanted to cutoff the "double dipping"
(4) this is not a way to reduce tax liability i.e. this is not solely for purpose "avoidance" of taxation.
(5) To @NCperson , I don't know how to answer your point about increasing net income on schedule-C and thereby qualifying for "other / income based " credits. But for my small brain, it seems that IRS / code cannot force a filer to recognize expenses against an income even if that means credits ( non-refundable or otherwise) while paying higher income tax and SECA taxes. I am not very familiar with the language of the relevant code sections. My general sense is that while one has to recognize all income ( it is a must function), only specific deductions are allowed ( and therefore it is a "may" function ).
I am, by no means, asking a user to use this mechanism to bypass the form 1116 limitations ( and giving up any carry over benefits ) but offering a possibility. The choice and the results belong to the individual user.
regards
pk