Reg. 1.267(a)-3(b) provides: "Except as provided in paragraph (c) of this section, section 267(a)(3) requires a taxpayer to use the cash method of accounting with respect to the deduction of amounts owed to a related foreign person. An amount that is owed to a related foreign person and that is otherwise deductible under Chapter 1 thus may not be deducted by the taxpayer until such amount is paid to the related foreign person.

F, a French corporation, loaned funds to its US sub. The US sub is on the accrual method and in 2006 it deducted the interest that accrued for the year but not paid until 2007. The IRS says that the reg. disallows the accrual and puts the US sub on the cash basis for this item. F claims that the anti-discrimination article prevents this action by the IRS. Would the anti-discrimination provision apply? See Square D, 118 TC 299.