On 28 September 2007, the Japanese Supreme Court delivered its decision that the CFC rule disallows Japanese parent companies from deducting losses incurred by controlled foreign companies in the calculation of the parent company's taxable income. In the case at hand, the Japanese parent company P's Panamanian subsidiary S was considered to be a CFC of P under the Japanese CFC rule. S incurred losses in the past 3 years, which effectively means that there is no "CFC income". Nevertherless, P, in its income tax return deducted S's losses for the relevant period(s) on the grounds that the losses were...