547, 556 (1951); Standard Envelope Manufacturing Co. v. Commissioner, 15 T.C. 41, 48 (1950).11 Because of the posture of this case, it is unnecessary, and we do not undertake, to resolve the legal issue whether the like-kind requirement was satisfied. It suffices to find, as we do, that petitioner had a bona fide intent that the subject transaction would meet the like-kind exchange requirement, taking into account that it constituted an exchange of realty for realty. Other relevant factors indicating that petitioner had, at the beginning of the exchange period, a bona fide intent that like-kind property would be acquired before the end of the 180-day exchange period include: (1) The agreement that petitioner and Rayonier entered into on November 29, 1994, expressly made the transaction conditioned on "reasonable cooperation and a tax free exchange qualifying under Section 1031"; (2) petitioner used a qualified escrow account and a proper escrow agent as required by section 1.1031(k)-1(g)(3), Income Tax Regs.; (3) petitioner identified and received the replacement properties within the 45-day and 180-day periods as required by section 1031(a)(3); (4) petitioner testified credibly that he intended to have a like-kind exchange; and (5) in planning the transaction, petitioner relied on advice from a well-known timber taxation expert and from his longtime accountant. Moreover, as previously mentioned, respondent has determined no negligence or accuracy-related penalty in regard to the subject transaction. F. Conclusion In light of all the facts and circumstances, we conclude and hold that petitioners have satisfied the bona fide intent test and that under section 1.1031(k)-1(j), Income Tax Regs., petitioners had no actual or constructive receipt of property in 1994 for purposes of applying the installment sale provisions of section 453. We conclude and hold that petitioners recognized no gain from the subject transaction in 1994 and that respondent's determination was in error. 11 Notably, this characterization of short-term leasehold interests derives not from any particular State law but from negative implication of longstanding Treasury regulations which provide that an exchange of a 30-year lease for a fee interest qualifies as a like-kind exchange under sec. 1031. See sec. 1.1031(a)-1(c), Income Tax Regs. In light of this holding, it is unnecessary to decide the issue of whether the subject transaction qualifies as a likekind exchange within the meaning of section 1031. To reflect the foregoing and the parties' concessions, Decision will be entered under Rule 155. CHRYSLER CORPORATION, F.K.A. CHRYSLER HOLDING CORPORATION, AS SUCCESSOR BY MERGER TO CHRYSLER MOTORS CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES, PETITIONER V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT Docket No. 22148-97. Filed June 29, 2001. P's 1980, 1981, and 1982 Federal income tax returns claimed deductions for foreign tax liabilities which had accrued during those years. On July 24, 1995, P amended those returns to elect foreign tax credits in lieu of the deductions and amended its 1985 return to claim a refund from a carryover of the foreign taxes to 1985. R disallowed the claim, determining in relevant part that P's change of the deductions to credits was untimely under sec. 901(a), I.R.C. Held: P's election to credit the foreign taxes was untimely under sec. 901(a), I.R.C. The period specified therein commenced on the due dates of the returns for 1980, 1981, and 1982, the years for which P elected the foreign tax credit. James P. Fuller, Ronald B. Schrotenboer, Kenneth B. Clark, William F. Colgin, and Barton W.S. Bassett, for petitioner. Jeffrey L. Bassin, Nancy B. Herbert, and Bethany A. Ingwalson, for respondent. OPINION LARO, Judge: Respondent moves the Court for partial summary judgment. See Rule 121. Respondent determined deficiencies of $593,967, $13,064,705, and $36,102,409 in petitioner's Federal income taxes for 1983, 1984, and 1985, respectively. The deficiencies are attributable partially to respondent's determination that petitioner could not in 1995 amend its 1985 tax return to claim for that year a carryover of foreign tax credits which accrued in 1980, 1981, and 1982. We decide for the first time whether petitioner timely elected under section 901(a) to credit (rather than deduct) its 1980, 1981, and 1982 foreign taxes.1 We hold it did not. Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the years in issue. Rule references are to the Tax Court Rules of Practice and Procedure. Background All facts were stipulated. The parties' stipulation of facts and the exhibits submitted therewith are incorporated herein by this reference. The stipulated facts are found accordingly. Petitioner's principal place of business was in Auburn Hills, Michigan, when the petition was filed. Petitioner is an accrual basis taxpayer that reports its income and expenses on the basis of the calendar year. Petitioner timely filed its 1980 through 1985 Federal income tax returns on or about September 15 of the appropriate years. Petitioner deducted on its 1980 through 1983 returns its foreign taxes that accrued during those years. Petitioner claimed as a credit on its 1984 and 1985 returns its foreign taxes that accrued during those years. Petitioner reported the information shown in appendix A on its 1980 through 1985 returns, as originally filed. On July 24, 1995, petitioner amended its 1980 through 1985 returns. On that date, the period of limitation for assessment, credit, or refund was closed for 1980, 1981, and 1982 and open for 1983, 1984, and 1985. On each of the 1980 through 1983 amended returns, petitioner claimed a credit for its accrued foreign taxes, rather than the deduction it had reported originally. Petitioner's 1980 through 1985 amended returns disclose the information summarized in appendix B. On its original 1980 return, petitioner included $17,945,227 of section 78 gross-up income and claimed a deduction in the same amount. Petitioner also deducted $16,610,858 as direct foreign taxes paid, for a total deduction of $34,556,085. The 1980 amended return eliminated the foreign tax deduction, claiming in its place creditable foreign taxes (in the amount of the original deduction) resulting from 1 The parties also dispute whether petitioner timely claimed a refund under sec. 6511(d)(3)(A). On the basis of our holding on the issue before us, we need not decide that dispute. direct and deemed paid taxes. The 1980 amended return also claimed an additional $8,686,479 of deemed paid taxes, for total creditable foreign taxes of $43,242,564. The 1980 amended return reported total section 78 gross-up income of $26,631,706, an increase of $8,686,479 over the $17,945,227 reported on the original 1980 return. On its 1980 through 1982 amended returns, petitioner reported that the election of the foreign tax credit generated increased taxable income from the disallowance of the deduction for foreign taxes and increased section 78 gross-up income. Those amended returns reported net operating losses (NOL's) and no U.S. tax liability against which to credit foreign taxes; accordingly, petitioner applied no foreign tax credits on those amended returns. Petitioner had no taxable income or U.S. tax liability for 1978 and 1979 against which a foreign tax credit from 1980 or 1981 could have been applied by way of a carryback. Pursuant to petitioner's 1985 amended return, the creditable foreign taxes reported on the 1980 through 1982 amended returns were carried forward and claimed as a credit on the 1985 amended return, generating a claimed refund of $6,771,601 for that year. The carryover also "freed up" investment tax credits of $38,372,409 claimed on the original 1985 return, which petitioner treated as eligible to be carried forward to later years. In the notice of deficiency, respondent denied petitioner's refund claim made by way of the 1985 amended return. Respondent determined that petitioner's taxable income for 1980 through 1985, and its NOL carryover deductions for 1982 through 1985, were as follows: Taking into account agreed adjustments, the table in appendix C shows the result if petitioner is allowed to change its reporting for foreign taxes accrued in 1980, 1981, and 1982 from a deduction to a credit. Discussion The issue at hand involves three sections of the Code; namely, sections 901, 904, and 6511. These sections provide in relevant part as follows: SEC. 901. TAXES OF FOREIGN COUNTRIES AND OF POSSESSIONS OF UNITED STATES. (a) ALLOWANCE OF CREDIT.—If the taxpayer chooses to have the benefits of this subpart, the tax imposed by this chapter shall, subject to the limitation of section 904, be credited with the amounts provided in the applicable paragraph of subsection (b) plus, in the case of a corporation, the taxes deemed to have been paid under sections 902 and 960. Such choice for any taxable year may be made or changed at any time before the expiration of the period prescribed for making a claim for credit or refund of the tax imposed by this chapter for such taxable year. * * * [Emphasis added.] SEC. 904. LIMITATION ON CREDIT. (a) LIMITATION.-The total amount of the credit taken under section 901(a) shall not exceed the same proportion of the tax against which such credit is taken which the taxpayer's taxable income from sources without the United States (but not in excess of the taxpayer's entire taxable income) bears to his entire taxable income for the same taxable year. * * * (c) CARRYBACK AND CARRYOVER OF EXCESS TAX PAID.-Any amount by which all taxes paid or accrued to foreign countries or possessions of the United States for any taxable year for which the taxpayer chooses to have the benefits of this subpart exceed the limitation under subsection (a) shall be deemed taxes paid or accrued to foreign countries or possessions of the United States in the second preceding taxable year, in the first preceding taxable year, and in the first, second, third, fourth, or fifth succeeding taxable years, in that order and to the extent not deemed taxes paid or accrued in a prior taxable year * * * SEC. 6511. LIMITATIONS ON CREDIT OR REFUND. (a) PERIOD OF LIMITATION ON FILING CLAIM.-Claim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, * * * * * * * * * (d) SPECIAL RULES APPLICABLE TO INCOME TAXES. * |