Some of the dividend deductions taken by Varian Medical Systems Inc. must be disallowed because the medical device and software manufacturer didn’t directly hold shares of controlled foreign corporations for which the deductions were claimed, the US Tax Court said Wednesday.
Granting the IRS’ motion for summary judgment, Judge Emin Toro said that the formula used to compute Varian’s foreign tax credit disallowance under IRC Section 245A(d)(1) must include the post-IRC Section 965(c) deferred foreign income in the denominator of the fraction—meaning the calculation must include the post-IRC Section 965(c) in order to arrive at Varian’s “net section 965 inclusion.” ...