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TITLE 26-INTERNAL REVENUE CODE For purposes of the preceding sentence, the term "compensating use tax" means, in re- spect of any item, a tax which-- (I) is imposed on the use, storage, or consumption of such item, and (ii) is complementary to a general sales tax, but only if a deduction is allowable under subsection (a)(4) in respect of items sold at retail in the taxing jurisdiction which are similar to such item. (E) Special rules for motor vehicles In the case of motor vehicles, If the rate of tax exceeds the general rate, such excess shall be disregarded and the general rate shall be treated as the rate of tax. (3) State or local taxes A State or local tax includes only a tax im- posed by a State, a possession of the United States, or a political subdivision of any of the foregoing, or by the District of Columbia. (4) Foreign taxes A foreign tax includes only a tax imposed by the authority of a foreign country. (5) Separately stated general sales taxes and gaso- line taxes If the amount of any general sales tax or of any tax on the sale of gasoline, diesel fuel, or other motor fuel is separately stated, then, to the extent that the amoumt so stated is paid by the consumer (otherwise than in connec- tion with the consumer's trade or business) to his seller, such amount thall be treated as a tax imposed on, and paid by, such consumer. (c) Deduction denied in case of certain taxes No deduction shall be allowed for the follow- ing taxes: (1) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; but this paragraph shall not prevent the deduction of so much of such taxes as is properly allocable to maintenance or interest charges. (2) Taxes on real property, to the extent that subsection (d) requires such taxes to be treated as imposed on another taxpayer. (d) Apportionment of taxes on real property between seller and purchaser (1) General rule For purposes of subsection (a), if real prop- erty is sold during any real property tax year, then- (A) so much of the real property tax as is properly allocable to that part of such year which ends on the day before the date of the sale shall be treated as a tax imposed on the seller, and (B) so much of such tax as is properly al- locable to that part of such year which begins on the date of the sale shall be treat- ed as a tax imposed on the purchaser. (2) Special rules (A) in the case of any sale of real proper- ty, if- (I) a taxpayer may not, by reason of his method of accounting, deduct any amount for taxes unless paid, and (ii) the other party to the sale is (under the law impc3ing the real property tax) liable for the real property tax for the real property tax year, then for purposes of subsection (a) the tax- payer shall be treated as having paid, on the date of the sale, so much of such tax as, under paragraph (1) of this subsection, is treated as imposed on the taxpayer. For purposes of the preceding sentence, if nei- ther party is liable for the tax, then the party holding the property at the time the tax becomes a lien on the property shall be considered liable for the real property tax for the real property tax year. (B) In the case of any sale of real proper- ty, if the taxpayer's taxable income for the taxable year during which the sale occurs is computed under an accrual method of ac- counting, and if no election under section 461(c) (relating to the accrual of real prop- erty taxes) applies, then, for purposes of subsection (a), that portion of such tax which- (i) is treated, under paragraph (1) of this subsection, as imposed on the taxpay- er, and (ii) may not, by reason of the taxpayer's method of accounting, be deducted by the taxpayer for any taxable year, shall be treated as having accrued on the date of the sale. (e) Taxes of shareholder paid by corporation Where a corporation pays a tax imposed on a shareholder on his interest as a shareholder, and where the shareholder does not reimburse the corporation, then- (1) the deduction allowed by subsection (a) shall be allowed to the corporation; and (2) no deduction shall be allowed the share- holder for such tax. (f) Cross references (1) For provisions disallowing any deduction for the payment of the tax imposed by subchapter B of chapter 3 (relating to tax.free covenant bonds), see section 1451. (2) For provisions disallowing any deduction for cei- tain taxes, see section 275. (Aug. 16, 1954, ch. 736, 68A Stat. 47; Sept. 2, 1958, Pub. L. 85-866, title I, § 6(a), 72 Stat. 1608; Feb. 26, 1964, Pub. L. 88-272, title II, § 207(a), (b)(1), (2), 78 Stat. 40-42; Oct. 27, 1972, Pub. L. 92-580, § 4(a), 86 Stat. 1277; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(a)(25), 1951(b)(3)(A), 90 Stat. 1767, 1837.) AMENDMENTS 1976-Subsec. (d)(2). Pub. L. 94-455, § 1901(a)(25), re- designated former subpar. (D) as (B) and struck out former subpar. (B) which related to the taxable years that subsec. (d)(1) applied and former subpar. (C) which related to the limitations on subsec. (d)(1) where real property tax was allowable as a deduction under the Internal Revenue Code of 1939. Subsec. (f). Pub. L. 94-455, § 1951(b)(3)(A), redesig- nated former subsec. (g) as Cf). Former subsec. Cf), which related to payments for municipal services in atomic energy communities, was struck out. 1972-Subsec. (b)(2). Pub. L. 92-580 added subpar. CE). 1964-Subsec. (a). Pub. L. 88-272, § 207(a), limited the subsection to State, local and foreign real proper- ty, income, war profits, excess profits, and unspecified taxes, on a business or activity described in section 212, and to State and local personal property, general sales, gasoline, diesel fuel and other motor fuel taxes. Page 146 § 164