This is the fourth in a series of posts about “treaty based” foreign tax credits. The purpose of this post is NOT to discuss how the foreign tax credit rules work. The purpose is to discuss when a later statute can override an earlier tax treaty. It just so happens that this principle will be discussed in the context of foreign tax credit issues.
(The three previous posts discussed the foreign tax credit rules in the context of the NIIT (“Net Investment Income Tax“). For a description of the first three posts, see the Appendix to this post.)
The governing principle for when a statute can override a tax treaty seems to be that:
1. Generally statutes and treaties are (if possible) to be interpreted to give effect to both.
2. A later statute will override an earlier treaty only when the the statute reflects a clear legislative intent to do override the treaty.
When Can A Statute Override A Tax Treaty?
The principle will be explored in the context of:
A. The Bruyea Case
B. The Section 2801 Regulations Governing Covered Gifts