Rev. Rul. 63-248

Advice has been requested whether the special 10-year period of limitation provided under section 6511(d)(3) of the Internal Revenue Code of 1954 is applicable where a taxpayer initially elected to claim paid or accrued foreign taxes as a deduction rather than as a credit.

The taxpayer corporation received a dividend in 1958 from a foreign corporation. It filed its 1958 return on March 12, 1959, and at that time paid the tax due as shown on the return. In such return, it deducted, under section 164 of the Code, the amount of the foreign tax paid on the dividend. On March 20, 1962, the taxpayer filed a claim for refund, taking the 1958 foreign tax as a foreign tax credit in lieu of a deduction. The 3-year period of limitations provided in section 6511(a) of the Code expired on March 15, 1962. However, the taxpayer contends that the claim was timely filed since the 10-year period of limitations provided in section 6511(d)(3) had not expired.

The specific issue presented in this case is whether the taxpayer has the right to make or change the election to claim foreign taxes as a deduction in computing taxable income or as a credit against United States income tax at any time within the 10-year period of limitation provided by section 6511(d)(3)(A) of the Code.

Section 6511(a) of the Code reads, in part, as follows:

(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, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid. * * *

Section 6511(d)(3)(A) of the Code provides as follows:

(A) SPECIAL PERIOD OF LIMITATION WITH RESPECT TO FOREIGN TAXES PAID OR ACCRUED.-If the claim for credit or refund relates to an overpayment attributable to any taxes paid or accrued to any foreign country or to any possession of the United States for which credit is allowed against the tax imposed by subtitle A in accordance with the provisions of section 901 or the provisions of any treaty to which the United States is a party, in lieu of the 3-year period of limitation prescribed in subsection (a), the period shall be 10 years from the date prescribed by law for filing the return for the year with respect to which the claim is made.

The enactment of Public Law 87-780, September 14, 1960, C.B. 1960-2, 720, amending sections 901 through 904 of the Code, Clarified section 6511(d)(3). H.R. Report No. 1358, Eighty-sixth Congress, Second Session, C.B. 1960-2, 865, at 869, states, in part, as follows:

The bill also provides that the choice to take the foreign tax credit in lieu of the deduction, * * * must in general be made or changed within the 3-year statute of limitations (or the statute which applies to the tax itself) and not within the special 10-year statute provided by section 6511(d)(3). The bill provides that for periods to which the 1954 Code is applicable (generally the calendar year 1954 and subsequent years) this 10-year statute is to be available only for purposes of determining the size of the credit, and not for purposes of making * * * a choice between a deduction or credit.

* * * Also as indicated above, the bill provides that generally the 3-year statute, but in no case the 10-year statute, is to be available for choices between the selection of the deduction or credit, or overall or per country limitation for taxable years beginning after December 31, 1953, and ending after August 16, 1954.

In view of the above, the taxpayer may not make or change the election to claim paid or accrued foreign taxes as a deduction in computing taxable income or as a credit against United States income tax within the ten-year period of limitation provided by section 6511(d)(3)(A) of the Code after the three-year period of limitation provided by section 6511(a) of the Code has expired. The ten-year statute prescribed by section 6511(d)(3)(A) of the Code is available only for the purposes of determining the size of the credit and not for the purposes of making a choice between a deduction or credit.

Accordingly, it is held that the taxpayer's claim for refund was not timely since it was not filed within the period prescribed by section 6511(a) of the Code.