Try out of the safe harbor formula in Reg 1.901-2A on this case. Taxpayer, a U.S. mining corporation operating in Country X, has $1,000 of gross receipts and $500 of mining costs. It mines government land but pays no royalty to the government. It pays a levy to the Country X government of $300. (Because Taxpayer is subject to the Country X income tax.) The tax rate in Country X "applicable in computing tax liability under the general tax" is 33 1/3 percent of net income. See Reg. 1.901-2A (e)(3). How much of the $300 payment will be considered a creditable tax? How do the regulations treat that part of the $300 payment that is not a tax? See Reg. 1.901-2A(b)(1). Do you think the result in this case makes sense?