3 Int'l Tax J. 90 (1976-1977)
Revenue Rulings

handle is hein.journals/intaxjo3 and id is 90 raw text is: Revenue Rulings
WALTER M. SELTZER
Foreign Tax Credit
A subsidiary of a U.S, corporation entered into several production sharing
contracts with an agency of the Government of Indonesia for oil exploration.
The contract provided fordxploration expenditures, payment of a bonus to the
Indonesian agency, mandatory charitable contributions and production bonuses
when production reaches a certain level. In addition, the subsidiary must pay
its own expenses. The subsidiary can recover some of the foregoing expenditures
in barrels of oil prior to the division of oil with the Agency. 70% of the remain-
ing barrels goes to the Agency.
No part of the Government's share of the oil production is a tax - it is merely
payment for the oil which, under Indonesian law, is owned by the Govern-
ment. Therefore, no foreign tax credit is allowed. Rev. Rul. 76-215. However,
Section 1035(c) of the Tax Reform Act of 1976 provides that this result will be
prospective only.
Reorganizations, etc.
A U.S. corporation owns 60% of the shares of a foreign corporation and its
wholly-owned foreign or domestic subsidiary owns the remaining 40%. For
the purpose of section 367(d)i the subsidiary which owns 40% will be treated
as owning the parent's shares. Machinery transferred without consideration to
the 40% owned subsidiary will be considered a contribution to capital provided
an advance ruling is obtained. Rev. Rul. 76-240.
The effective date of a section 367 ruling issued with respect to certain ex-
changes of property involving CFCs will be the date of the ruling letter, provided
that a closing agreement specified in Rev. Proc. 75-29 is signed within 180 days
from the date of the ruling letter. Rev. Proc. 76-24.
A U.S. corporation requested and received a favorable advance ruling con-
cerning the proposed transfer of certain of its assets, subject to certain of its
liabilities, to a newly formed and wholly-owned foreign subsidiary. As part of
the plan for consummating the transaction described in the ruling request, the
corporation transferred additional assets and liabilities not disclosed in the ruling
WALTER M. SELTZER is Assistant Vice President, Chemical Bank.

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