Finally, after a lengthy wait the tax position on how to deal with foreign tax credits when a taxpayer sells a CGT asset has (some) clarity. Unfortunately, the Federal Court affirms the ATO postion in the matter of Burton v FCT. This is, where a CGT gain is discounted the foreign tax offset for foreign tax paid on the same event will be HALVED. ie the tax credit is alowed to the extent of the assessable value. Burton v Commissioner of Taxation  FCAFC 141 (22 August 2019) In the Burton case the taxpayer sold a US property. The USA assessed source taxation on the CGT amount. The taxpayer then reported the same gain albeit with a CGT discount of 50%. The taxpayer claimed the full foreign income tax offset. The ATO disallowed 50% on the offset on the basis that 50% of the gain was non-assesaable and therefore the offset is not allowed. Owners of foreign CGT assets take note. This may apply to direct shares or property and also indirect interest in CGT assets incl shares, property etc. A SMSF is similiarly affected and may only be allowed up to 2/3rd of the foreign tax offset on the CGT gain. For assets not subject to the general 50% CGT discount the full foreign tax offste may be allowed. Note also that a foreign tax offset may be limited to the extent of Australian tax on that income and not more. eg The Mythical SMSF sells a San Diego property for a gain of $100K AUD. The Australian tax on this gain is $10,000. The US tax paid is $18,000AUD. The foreign tax offset must be reduced by 1/3 ie it is now $12,000. In some instances the foreign tax credit will be limited to a potential $10,000 Taxpayers should note s770-10 of ITAA97 Note 2 which expresses this same view. The Federal Court upheld that the despite the earlier court findings may have been flawed in some aspects of the Double Tax agreement the ultimate legislative provision governing the offset is clear.