2025-04-08
Yesterday the Court of Federal Claims published an opinion, Estate of Armitrage v. U.S. , where the IRS disallowed deemed paid foreign tax credits under Code §960 because the taxpayer did not include an election statement under Code §962 on an amended tax return.
The case related to the Code §965 transition tax (also known as the mandatory repatriation tax). The taxpayer filed his original 2017 Form 1040 without picking up the income of his Canadian controlled foreign corporation (“CFC”), which he was required to do under the transition tax. About a year later, he filed an amended tax return and picked up $780,000 of additional income from his Canadian CFC. However, the amended tax return claimed indirect foreign tax credits equal to the increase in tax from the additional income of $780,000.
The IRS disallowed the indirect foreign tax credits because the taxpayer did not include the election statement required under Treas. Reg. §1.962-2(b)(1) with the amended tax return.
The Court of Federal Claims dismissed the case for lack of jurisdiction because the taxpayer had not yet paid the tax that the IRS assessed.