Can Foreign Tax Credits Offset Net Investment Income Taxes? Tax Court Holds that It Depends on the Treaty.




Taxpayers dislike paying taxes once, and they absolutely detest paying them twice. The good news is that U.S. individuals working and/or investing abroad can often mitigate “double taxation” thanks to a few mechanisms, including foreign tax credits and bilateral tax treaties. Qualifying for these benefits can be tricky, of course. One controversial issue has been whether U.S. individuals can use foreign tax credits to offset net investment income taxes. A recent Tax Court case, Toulouse v. Commissioner, partially resolves that question, while expressly leaving open the possibility of different outcomes.

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About Hale E. Sheppard
HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

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