The Internal Revenue Service and Treasury Department announced the release of proposed regulations that would disallow foreign tax credits for foreign taxes purportedly paid in connection with certain artificially engineered, highly structured transactions.

Foreign tax credits are designed to relieve U.S. taxpayers from double taxation of their foreign source income. Transactions addressed by the regulations, in contrast, are structured so that U.S. taxpayers voluntarily subject themselves to foreign tax where an ordinary business transaction generally would result in little, or no, foreign tax paid by the U.S. taxpayer.

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