Common use of Alternative facts Clause in Contracts

Alternative facts. (A) The facts are the same as in paragraph (i) of this Example 6, except as follows. Instead of owning DE1X, P owns DE3Y which, in turn, owns DE1X. In ad- dition, DE3Y, rather than DE1X, is the obli- gor on the third-party loan and therefore in- curs the interest expense on such loan. Fi- xxxxx, DE3Y on-lends the loan proceeds from the third-party loan to DE1X, and DE1X pays interest to DE3Y on such loan that is gen- erally disregarded for U.S. tax purposes. (B) Pursuant to § 1.1503(d)–5(c)(1)(ii), for purposes of calculating income or a dual con- solidated loss, DE3Y and DE1X do not take into account interest income or interest ex- pense, respectively, with respect to amounts paid on the disregarded loan from DE3Y to DE1X. As a result, such items neither create a dual consolidated loss with respect to the interest in DE1X, nor do they reduce (or eliminate) the dual consolidated loss attrib- utable to the interest in DE3Y. Thus, in year 1, there is a dual consolidated loss attrib- utable to P’s interest in DE3Y, but not to P’s indirect interest in DE1X. (C) In year 1, interest expense paid by DE1X to DE3Y on the disregarded loan is taken into account as a deduction in computing DE1X’s taxable income for Country X tax purposes, but does not give rise to a corresponding item of income or gain for U.S. tax purposes (because it is generally disregarded). In addi- tion, such interest has the effect of making an item of deduction or loss composing the dual consolidated loss attributable to P’s in- terest in DE3Y available for a foreign use. This is the case because it may reduce or off- set items of deduction or loss composing the dual consolidated loss for foreign tax pur- poses, and creates another deduction or loss that may reduce or offset income of DE1X for foreign tax purposes that, under U.S. tax principles, is treated as income of FRHX, a foreign corporation. Moreover, because the disregarded item is incurred or taken into account as interest for foreign tax purposes, it is deemed to have been incurred or taken into account with a principal purpose of avoiding the provisions of section 1503(d). Ac- cordingly, there is an indirect foreign use of the year 1 dual consolidated loss attributable to P’s interest in DE3Y, and P cannot make a domestic use election with respect to such loss as provided under § 1.1503(d)–6(d)(2). Thus, the loss will be subject to the domestic use limitation rule of § 1.1503(d)–4(b).