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applying the last-in-time rule, the U.S. Circuit Court for the District of Columbia held on Aug. 8 that a tax statute prevails over a tax treaty. Kappus v. Commissioner of Internal Revenue, No. 02-1145. A married couple who are United States citizens living in Canada reduced their $69,410 income tax liability for 1997 to zero by applying a foreign tax credit based on their payment of Canadian income taxes. They also reduced their alternative minimum tax (AMT) liability to zero by applying an AMT foreign tax credit. They claimed that a tax treaty between the United States and Canada exempted them from 26 U.S.C. 59(a)(2), which states that the AMT foreign tax credit may not exceed 90% of a taxpayer’s precredit tentative minimum tax. The Commissioner of Internal Revenue notified the couple that they owed $6,152 in income tax, equal to 10% of their precredit tentative minimum tax as based on the statute. In response to a petition filed by the couple, the Tax Court ruled in favor of the commissioner. Article XXIV of the U.S.-Canada Tax Treaty allows a credit against U.S. income tax based on income tax paid to Canada “subject to the limitations of the law of the United States.” Although there is a question as to whether the treaty and the statute can be harmonized, the D.C. Circuit found the answer unnecessary. Because the statute was enacted after the treaty, it prevails and the taxpayers owe a deficiency.

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