INTEREST DEDUCTIONS were denied.
The US Tax Court said in a decision on March 27 that a US subsidiary could not deduct interest it owed its French parent as the interest accrued, but rather had to wait until it actually made payments. The court cited an IRS regulation that requires a company to wait until actual payment of interest before deducting it, when the interest is paid to a related foreign person who will not be subject to US taxes on the interest. The court said the regulation does not violate the US tax treaty with France. This case is Square D Co. v. Commissioner.