26 CFR 1.960-2 - Interrelation of section 902 and section 960 when dividends are paid by third-, second-, or first-tier corporation.

§ 1.960-2 Interrelation of section 902 and section 960 when dividends are paid by third-, second-, or first-tier corporation.

(a)Scope of this section. This section prescribes rules for the application of section 902 in a case where dividends are paid by a third-, second-, or first-tier corporation, as the case may be, from its earnings and profits for a taxable year when an amount attributable to such earnings and profits is included in the gross income of a domestic corporation under section 951, or when such earnings and profits are attributable to an amount excluded from the gross income of such foreign corporation under section 959(b) and § 1.959-2, with respect to the domestic corporation. In making determinations under this section, any portion of a distribution received from a first-tier corporation by the domestic corporation which is excluded from the domestic corporation's gross income under section 959(a) and § 1.959-1, or any portion of a distribution received from an immediately lower-tier corporation by the third-, second-, or first-tier corporation which is excluded from such foreign corporation's gross income under section 959(b) and § 1.959-2, shall be treated as a dividend for purposes of taking into account under section 902 any foreign income taxes paid by such third-, second-, or first-tier corporation which are not deemed paid by the domestic corporation under section 960(a)(1) and § 1.960-1.

(b)Application of section 902(b) to dividends received from an immediately lower-tier corporation. For purposes of paragraph (a) of this section and paragraph (c)(1)(i) of § 1.960-1, section 902(b) shall apply to all dividends received by the first- or second-tier corporation from the immediately lower-tier corporation other than dividends attributable to earnings and profits of such immediately lower-tier corporation in respect of which an amount is, or has been, included in the gross income of a domestic corporation under section 951 with respect to such immediately lower-tier corporation.

(c)Application of section 902(a) to dividends received by domestic corporation from first-tier corporation. For purposes of paragraph (a) of this section, section 902 (a) shall apply to all dividends received by the domestic corporation for its taxable year from the first-tier corporation other than dividends attributable to earnings and profits of such first-tier corporation in respect of which an amount is, or has been, included in the gross income of a domestic corporation under section 951 with respect to such first-tier corporation.

(d)Allocation of earnings and profits of a first- or second-tier corporation having income excluded under section 959(b) -

(1)First-tier corporations. If the first-tier corporation for its taxable year receives dividends from the second-tier corporation to which in accordance with paragraph (b) of this section 902(b)(1) or section 902(b)(2) applies and other dividends from the second-tier corporation to which such sections do not apply, then in applying section 902(a) pursuant to this section and in applying section 960(a)(1) pursuant to § 1.960-1(c)(1)(i), with respect to the foreign income taxes paid and deemed paid by the second-tier corporation which are deemed paid by the first-tier corporation for such taxable year under section 902(b)(1) -

(i) The earnings and profits of the first-tier corporation for such taxable year shall be considered not to include its earnings and profits which are attributable to the dividends to which section 902(b)(1) does not apply (in determining the domestic corporation's credit for the taxes paid by the second-tier corporation) or which are attributable to the dividends to which sections 902(b)(1) and 902(b)(2) do not apply (in determining the domestic corporation's credit for taxes deemed paid by the second-tier corporation) and

(ii) For the purposes of so applying section 902(a), distributions to the domestic corporation from such earnings and profits which are attributable to the dividends to which section 902(b)(1) does not apply (in determining the domestic corporation's credit for taxes paid by the second-tier corporation) or which are attributable to the dividends to which sections 902(b)(1) and 902(b)(2) do not apply (in determining the domestic corporation's credit for taxes deemed paid by the second-tier corporation) shall not be treated as a dividend.

(2)Second-tier corporations. If the second-tier corporation for its taxable year receives dividends from the third-tier corporation to which, in accordance with paragraph (b) of this section, section 902(b)(2) applies and other dividends from the third-tier corporation to which such section does not apply, then in applying section 902(b)(1) pursuant to this section, and in applying section 960(a)(1) pursuant to paragraph (c)(1)(i) of § 1.960-1, with respect to the foreign taxes deemed paid by the second-tier corporation for such taxable year under section 902(b)(2) -

(i) The earnings and profits of the second-tier corporation for such taxable year shall be considered not to include its earnings and profits which are attributable to such other dividends from the third-tier corporation, and

(ii) For the purposes of so applying section 902(b)(1), distributions to the first-tier corporation from such earnings and profits which are attributable to such other dividends from the third-tier corporation shall not be treated as a dividend.

(e)Separate determinations under sections 902(a), 902(b)(1), and 902(b)(2) in the case of a first-, second-, or third-tier corporation having income excluded under section 956(b). If in the case of a first-, second-, or third-tier corporation to which paragraph (b) or (c) of this section is applied -

(1) The earnings and profits of such foreign corporation for its taxable year consist of -

(i) Dividends received from an immediately lower-tier corporation which are attributable to amounts included in the gross income of a domestic corporation under section 951 with respect to the immediately lower- or lower-tier corporations, and

(ii) Other earnings and profits, and

(2) The effective rate of foreign income taxes paid or accrued by such foreign corporation on the dividends described in paragraph (e)(1)(i) of this section is higher or lower than the effective rate of foreign income taxes attributable to its earnings and profits described in paragraph (e)(1)(ii) of this section,

then, for purposes of applying paragraph (b) or (c) of this section to dividends paid by such foreign corporation to the domestic corporation or the first- or second-tier corporation, sections 902(a), 902(b)(1), and 902(b)(2) shall be applied separately to the portion of the dividend which is attributable to the earnings and profits described in paragraph (e)(1)(i) of this section and separately to the portion of the dividend which is attributable to the earnings and profits described in paragraph (e)(1)(ii) of this section. In making a separate determination with respect to the earnings and profits described in paragraph (e)(1)(i) or (e)(1)(ii) of this section, only the foreign income taxes paid or accrued (or, in the case of earnings and profits of a first- or second-tier corporation described in paragraph (e)(1)(ii) of this section, deemed to be paid) by such foreign corporation on the income attributable to such earnings and profits shall be taken into account. For purposes of applying this paragraph (e), no part of the foreign income taxes paid, accrued, or deemed to be paid which are attributable to the earnings and profits described in paragraph (e)(1)(ii) of this section shall be attributed to the dividend described in paragraph (e)(1)(i) of this section; and no part of the foreign income taxes paid or accrued on the dividend described in paragraph (e)(1)(i) of this section shall be attributed to the earnings and profits described in paragraph (e)(1)(ii) of this section. Furthermore, the effective rate of foreign income taxes paid or accrued shall be determined consistently with the principles of paragraphs (b)(3)(iv) and (viii) and (c) of § 1.954-1. Thus, for example, the effective rate of foreign income taxes on dividends received by such foreign corporation shall be determined by taking into account any intercorporate dividends received deduction allowed to such corporation for such dividends.

(f)Illustrations. The application of this section may be illustrated by the following examples. In all of the examples other than examples 6, 7, 9 and 10, it is assumed that the effective rate of foreign income taxes paid or accrued by the first- or second-tier corporation, as the case may be, in respect to dividends received from the immediately lower-tier corporation, is the same as the effective rate of foreign income taxes paid or accrued by the first- or second-tier corporation with respect to its other income:

Example 1.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B. All such corporations use the calendar year as the taxable year. For 1978, N Corporation is required under section 951 to include $50 in gross income attributable to the earnings and profits of A Corporation for such year, but is not required to include any amount in gross income under section 951 attributable to the earnings and profits of B Corporation. For such year, B Corporation distributes a dividend of $45, but A Corporation does not make any distributions. The foreign income taxes deemed paid by N Corporation for 1978 under section 960(a)(1), after applying section 902(b)(1) for such year of A Corporation, are determined as follows upon the basis of the facts assumed:
B Corporation (second-tier corporation):
Pretax earnings and profits $100.00
Foreign income taxes (40%) 40.00
Earnings and profits 60.00
Dividends paid to A Corporation $45.00
Foreign income taxes paid by B Corporation on or with respect to its accumulated profits 40.00
Foreign income taxes of B Corporation deemed paid by A Corporation for 1978 under section 902(b)(1) ($45/$60 × $40) 30.00
A Corporation (first-tier corporation):
Pretax earnings and profits:
Dividends from B Corporation $45.00
Other income 100.00
Total pretax earnings and profits 145.00
Foreign income taxes (20%) 29.00
Earnings and profits 116.00
Foreign income taxes paid, and deemed to be paid, by A Corporation on or with respect to its earnings and profits ($29 $30) 59.00
Amount required to be included in N Corporation's gross income under section 951 with respect to A Corporation 50.00
Dividends paid to N Corporation 0
N Corporation (domestic corporation):
Foreign income taxes of A Corporation deemed paid by N Corporation for 1978 under section 960(a)(1) ($50/$116 × $59) 25.43
Example 2.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B. All such corporations use the calendar year as the taxable year. For 1978, N Corporation is required under section 951 to include in gross income $150 attributable to the earnings and profits of B Corporation for such year, which B Corporation distributes during such year. Corporation N is not required for 1978 to include any amount in gross income under section 951 attributable to the earnings and profits of A Corporation, but A Corporation distributes for such year $135 from its earnings and profits attributable to B Corporation's dividend. The foreign income taxes deemed paid by N Corporation for 1978 under section 960(a)(1)(C) and section 902(a) are determined as follows upon the basis of the facts assumed:
B Corporation (second-tier corporation):
Pretax earnings and profits $250.00
Foreign income taxes (20%) 50.00
Earnings and profits 200.00
Amounts required to be included in N Corporation's gross income under section 951 with respect to B Corporation 150.00
Dividends paid to A Corporation 150.00
Foreign income taxes paid on or with respect to earnings and profits of B Corporation 50.00
A Corporation (first-tier corporation):
Pretax earnings and profits:
Dividends from B Corporation $150.00
Other income 200.00
Total pretax earnings and profits 350.00
Foreign income taxes (10%) 35.00
Earnings and profits 315.00
Dividends paid to N Corporation 135.00
Foreign income taxes paid by A Corporation on or with respect to its accumulated profits 35.00
N Corporation (domestic corporation):
Foreign income taxes of B Corporation deemed paid by N Corporation for 1978 under section 960(a)(1) ($150/$200 × $50) 37.50
Foreign income taxes of A Corporation deemed paid by N Corporation for 1978 under section 902(a) ($135/$315 × $35) 15.00
Total foreign income taxes deemed paid by N Corporation under section 901 52.50
Example 3.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B. All such corporations use the calendar year as the taxable year. For 1978, N Corporation is required under section 951 to include $180 in gross income attributable to the earnings and profits of A Corporation for such year, but is not required to include any amount in gross income under section 951 attributable to the earnings and profits of B Corporation. Corporation B distributes from its earnings and profits for 1978 a dividend of $50. For 1978, A Corporation distributes $180 from its earnings and profits attributable to the amount required under section 951 to be included in N Corporation's gross income for such year with respect to A Corporation and $20 from its other earnings and profits. The foreign income taxes deemed paid by N Corporation for 1978 under section 960(a)(1) and section 902(a) are determined as follows upon the basis of the facts assumed:
B Corporation (second-tier corporation):
Pretax earnings and profits $100.00
Foreign income taxes (40%) 40.00
Earnings and profits 60.00
Dividends paid to A Corporation 50.00
Foreign income taxes paid by B Corporation on or with respect to its accumulated profits 40.00
Foreign income taxes of B Corporation deemed paid by A Corporation for 1978 under section 902(b)(1) ($50/$60 × $40) 33.33
A Corporation (first-tier corporation):
Pretax earnings and profits:
Dividends from B Corporation $50.00
Other income 200.00
Total pretax earnings and profits 250.00
Foreign income taxes (10%) 25.00
Earnings and profits 225.00
Foreign income taxes paid, and deemed to be paid, by A Corporation on or with respect to its earnings and profits ($25.00 $33.33) 58.33
Amounts required to be included in N Corporation's gross income for 1978 under section 951 with respect to A Corporation 180.00
Dividends paid to N Corporation:
Dividends to which section 902(a) does not apply (from A Corporation's earnings and profits in respect of which an amount is required under section 951 to be included in N Corporation's gross income with respect to A Corporation) 180.00
Dividends to which section 902(a) applies (from A Corporation's other earnings and profits) 20.00
Total dividends paid to N Corporation $200.00
N Corporation (domestic corporation):
Foreign income taxes of corporations A and B deemed paid by N Corporation under section 960(a)(1) ($180/$225 × $58.33) 46.66
Foreign income taxes of corporations A and B deemed paid by N Corporation under section 902(a) ($20/$225 × $58.33) 5.18
Total foreign income taxes deemed paid by N Corporation under section 901 51.84
Example 4.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B. All such corporations use the calendar year as the taxable year. For 1978, N Corporation is required under section 951 to include in gross income $150 attributable to the earnings and profits of B Corporation for such year and $22.50 attributable to the earnings and profits of A Corporation for such year. For 1978, B Corporation distributes $175, consisting of $150 from its earnings and profits attributable to amounts required under section 951 to be included in N Corporation's gross income with respect to B Corporation and $25 from its other earnings and profits. Corporation A does not distribute any dividends for 1978. The foreign income taxes deemed paid by N Corporation for 1978 under section 960(a)(1) are determined as follows upon the basis of the facts assumed:
B Corporation (second-tier corporation):
Pretax earnings and profits $250.00
Foreign income taxes (20%) 50.00
Earnings and profits 200.00
Amounts required to be included in N Corporation's gross income under section 951 for 1978 with respect to B Corporation 150.00
Dividends paid by B Corporation:
Dividends to which section 902(b) does not apply (from B Corporation's earnings and profits in respect of which an amount is required under section 951 to be included in N Corporation's gross income with respect to B Corporation) $150.00
Dividends to which section 902(b)(1) applies (from B Corporation's other earnings and profits) 25.00
Total dividends paid to A Corporation 175.00
Foreign income taxes paid by B Corporation on or with respect to its accumulated profits 50.50
Foreign income taxes of B Corporation deemed paid by A Corporation for 1978 under section 902(b)(1) ($25/$200 × $50) 6.25
A Corporation (first-tier corporation):
Pretax earnings and profits 175.00
Foreign income tax (10 percent) 17.50
Earnings and profits 157.50
Earnings and profits after exclusion of amounts attributable to dividends to which section 902(b) does not apply ($157.50 less [$150− ($150 × 0.10)]) 22.50
Amount required to be included in N Corporation's gross income for 1978 under section 951 with respect to A Corporation 22.50
Dividends paid to N Corporation 0
N Corporation (domestic corporation):
Foreign income taxes deemed paid by N Corporation under section 960(a)(1)(C) with respect to A Corporation:
Tax actually paid by A Corporation ($22.50/$157.50 × $17.50) 2.50
Tax of B Corporation deemed paid by A Corporation under section 902(b)(1) ($22.50/$22.50 × $6.25) 6.25
8.75
Foreign income taxes deemed paid by N Corporation under section 960(a)(1)(C) with respect to B Corporation ($150/$200 × $50) 37.50
Total taxes deemed paid under section 960(a)(1)(C) 46.20
Example 5.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B. All such corporations use the calendar year as the taxable year. For 1978, N Corporation is required under section 951 to include in gross income $150 attributable to the earnings and profits of B Corporation for such year and $22.50 attributable to the earnings and profits of A Corporation for such year. For 1978, B Corporation distributes $175, consisting of $150 from its earnings and profits attributable to amounts required under section 951 to be included in N Corporation's gross income with respect to B Corporation and $25 from its other earnings and profits. For 1978, A Corporation distributes $225, consisting of $135 from its earnings and profits attributable to the amount required under section 951 to be included in N Corporation's gross, income with respect to B Corporation, $22.50 from its earnings and profits attributable to the amount required under section 951 to be included in N Corporation's gross income with respect to A Corporation, and $67.50 from its other earnings and profits. The foreign income taxes deemed paid by N Corporation for 1978 under section 960(a)(1) and section 902(a)(1) are determined as follows upon the basis of the facts assumed:
B Corporation (second-tier corporation):
Pretax earnings and profits $250.00
Foreign income taxes (20%) 50.00
Earnings and profits 200.00
Amounts required to be included in N Corporation's gross income for 1978 under section 951 with respect to B Corporation 150.00
Dividends paid by B Corporation:
Dividends to which section 902(b) does not apply (from B Corporation's earnings and profits in respect of which an amount is required under section 951 to be included in N Corporation's gross income with respect to B Corporation) $150.00
Dividends to which section 902(b) applies (from B Corporation's other earnings and profits) $25.00
Total dividends paid to A Corporation $175.00
Foreign income taxes paid by B Corporation on or with respect to its accumulated profits 50.00
Foreign income taxes of B Corporation deemed paid by A Corporation for 1978 under section 902(b)(1) ($25/$200 × $50) 6.25
A Corporation (first-tier corporation):
Pretax earnings and profits:
Dividends received from B Corporation 175.00
Other income 100.00
Total pretax earnings and profits 275.00
Foreign income taxes (10 percent) 27.50
Earnings and profits 247.50
Earnings and profits after exclusion of amounts attributable to dividends to which section 902(b) does not apply ($247.50 less [$150 −($150 × 0.10)]) 112.50
Amount required to be included in N Corporation's gross income for 1978 under section 951 with respect to A Corporation 22.50
Distributions paid by A Corporation:
Dividends to which section 902(a) does not apply (From A Corporation's earnings and profits in respect of which an amount is required under section 951 to be included in N Corporation's gross income with respect to A Corporation) 22.50
Dividends to which section 902(a) applies (from A Corporation's other earnings and profits) 202.50
Total dividends paid to N Corporation 225.00
N Corporation (domestic corporation):
Foreign income taxes deemed paid by N Corporation under section 960(a)(1) with respect to -
B Corporation ($150/$200 × $50) 37.50
A Corporation:
Tax paid by A Corporation ($22.50/ $247.50 × $27.50) 2.50
Tax of B Corporation deemed paid by A Corporation under section 902(b)(1) ($22.50/$112.50 × $6.25) 1.25 3.75
Total taxes deemed paid under section 960(a)(1) 41.25
Foreign income taxes deemed paid by N Corporation under section 902(a)(1) with respect to A Corporation:
Tax paid by A Corporation ($200.50/$247.50 × $27.50) 22.50
Tax of B Corporation deemed paid by A Corporation ($67.50/ $112.50 × $6.25) 3.75
Total taxes deemed paid under section 902(a)(1) 26.52
Total foreign income taxes deemed paid by N Corporation under section 901 67.05
Example 6.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B. All such corporations use the calendar year as the taxable year. A and B corporations are organized under the laws of foreign country X. All of B corporation's assets used in a trade or business are located in country X. Country X imposes an income tax of 20 percent on B corporation's income. For 1978, N Corporation is required under section 951 to include in gross income $100 attributable to the earnings and profits of B Corporation for such year. For 1978, B Corporation distributes $150, consisting of $100 from its earnings and profits attributable to the amount required under section 951 to be included in N Corporation's gross income with respect to B Corporation and $50 from its other earnings and profits. Country X imposes an income tax of 10 percent on A Corporation's income but exempts from tax dividends received from B Corporation. N is not required to include any amount in gross income under section 951 for 1978 attributable to the earnings and profits of A Corporation for such year. For 1978, A Corporation distributes $175, consisting of $100 from its earnings and profits attributable to the amount required under section 951 to be included in N Corporation's gross income with respect to B Corporation, and $75 from its other earnings and profits. The foreign income taxes deemed paid by N Corporation for 1978 under section 960(a)(1) and section 902(a) are determined as follows on the basis of the facts assumed:
B Corporation (2d-tier corporation):
Pretax earnings and profits $200.00
Foreign income taxes (20%) 40.00
Earnings and profits 160.00
Amount required to be included in N Corporation's gross income for 1978 under section 951 with respect to B Corporation 100.00
Dividends paid by B Corporation:
Dividends to which section 902(b) does not apply (from B corporation's earnings and profits in respect of which an amount is required under section 951 to be included in N corporation's gross income with respect to B corporation) $100.00
Dividends to which section 902(b)(1) applies (from B corporation's other earnings and profits) 50.00
Total dividends paid to A corporation 150.00
Foreign income taxes of B corporation deemed paid by A corporation for 1978 under section 902(b)(1) ($50/$100 × $40) 12.50
A corporation (1st-tier corporation):
Pretax earnings and profits:
Dividends received from B corporation 150.00
Other income 100.00
Total pretax earnings and profits 250.00
Foreign income taxes:
On dividends received from B corporation None
On other income ($100 × 0.10) 10.00
Total foreign income taxes 10.00
Earnings and profits:
Attributable to dividends received from B corporation to which section 902(b) does not apply 100.00
Attributable to other income:
Attributable to dividends received from B Corporation to which section 902(b)(1) applies 50.00
Attributable to other income ($100−$10) 90.00
Subtotal 140.00
Total earnings and profits 240.00
Earnings and profits after exclusion of amounts attributable to dividends to which section 902(b) does not apply ($240−$100) 140.00
Amount required to be included in N corporation's gross income for 1978 under section 951 with respect to A corporation None
Dividends paid by A corporation:
Dividends to which section 902(a) does not apply (from A corporation's earnings and profits in respect of which an amount is required under section 951 to be included in N corporation's gross income with respect to A corporation) None
Dividends to which section 902(a) applies (from A corporation's other earnings and profits) $175.00
Total dividends paid to N corporation $175.00
N corporation (domestic corporation):
Foreign income taxes deemed paid by N corporation under section 960(a)(1) with respect to B corporation ($100/$160 × $40) 25.00
Foreign income taxes deemed paid by N corporation under section 902(a) with respect to A corporation (allocation of earnings and profits being made under pars. (c)(2) and (d) of this section):
Tax paid by A corporation in respect to dividends received from B Corporation to which section 902(b) does not apply ($100/ $100 × $0) None
Tax paid by A corporation in respect to its other income ($75/ $140 × $10) 5.36
Tax paid by B corporation deemed paid by A corporation in respect to such other income ($75/$140 × $12.50) 6.70
Total taxes deemed paid under section 902(a) 12.06
Total foreign income taxes deemed paid by N corporation under section 901 37.06
Example 7.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B. All such corporations use the calendar year as the taxable year. For 1978, N Corporation is required under section 951 to include in gross income $150 attributable to the earnings and profits of B Corporation for such year and $47.50 attributable to the earnings and profits of A Corporation for such year. For 1978, B Corporation distributes $200, consisting of $150 from its earnings and profits attributable to the amount required under section 951 to be included in N Corporation's gross income with respect to B Corporation and $50 from its other earnings and profits. The country under the laws of which A Corporation is incorporated imposes an income tax of 5 percent on dividends received from a subsidiary corporation and 20 percent on other income. For 1978, A Corporation distributes $100 from its earnings and profits to N Corporation, such amount being attributable under paragraph (e) of § 1.959-3 to the amount required under section 951 to be included in N Corporation's gross income with respect to B Corporation. The foreign income taxes deemed paid by N Corporation for 1978 under section 960(a)(1) and section 902(a) are determined as follows on the basis of the facts assumed:
B Corporation (2d-tier corporation):
Pretax earnings and profits $250.00
Foreign income taxes (20 percent) 150.00
Earnings and profits 200.00
Amount required to be included in N Corporation's gross income for 1978 under section 951 with respect to B corporation 150.00
Dividends paid by B corporation:
Dividends to which section 902(b) does not apply (from B corporation's earnings and profits in respect of which an amount is required under section 951 to be included in N corporation's gross income with respect to B corporation) $150.00
Dividends to which section 902(b)(1) applies (from B corporation's other earnings and profits) 50.00
Total dividends paid to A corporation 200.00
Foreign income taxes of B corporation deemed paid by A corporation for 1978 under section 902(b)(1) ($50/$200 × $50) 12.50
A corporation (1st-tier corporation):
Pretax earnings and profits:
Dividends received from B corporation 200.00
Other income 100.00
Total pretax earnings and profits 300.00
Foreign income taxes:
On dividends received from B corporation to which section 902(b) does not apply ($150 × 0.05) 7.50
On other income:
Dividends received from B corporation to which section 902(b)(1) applies ($50 × 0.05) 2.50
Other income of A corporation ($100 × 0.20) 20.00
Total 22.50
Total foreign income taxes 30.00
Earnings and profits:
Attributable to dividends received from B corporation to which section 902(b) does not apply ($150−$7.50) 142.50
Attributable to other income:
Attributable to dividends received from B corporation to which section 902(b)(1) applies ($50−$2.50) 47.50
Attributable to other income ($100−$20 80.00
Total 127.50
Total earnings and profits 270.00
Earnings and profits after exclusion of amounts attributable to dividends to which section 902(b) does not apply ($270 less $142.50) 127.50
Amount required to be included in N corporation's gross income for 1978 under section 951 with respect to A corporation 47.50
Dividends paid by A Corporation:
Dividends to which section 902(a) does not apply (from A corporation's earnings and profits in respect of which an amount is required under section 951 to be included in N corporation's gross income with respect to A corporation) None
Dividends to which section 902(a)(1) applies (from A corporation's other earnings and profits) $100.00
Total dividends paid to N corporation $100.00
N Corporation (domestic corporation):
Foreign income taxes deemed paid by N corporation under section 960(a)(1) with respect to - B corporation ($150/$200 × $50) 37.50
A corporation (allocation of earnings and profits being made under § 1.960-1(c)(3) and par. (d) of this section):
Tax paid by A corporation ($47.50/$127.50 × $22.50) 8.38
Tax of B corporation deemed paid by A corporation under section 902(b)(1) ($47.50/$127.50 × $12.50) 4.66
Total 13.04
Total taxes deemed paid under section 960(a)(1) 50.54
Foreign income taxes deemed paid by N corporation under section 902(a) with respect to A corporation (allocations of earnings and profits being made under pars. (c)(2) and (d) of this section) ($100/$142.50 × $7.50) 5.26
Total foreign income taxes deemed paid by N Corporation under section 901 55.80
Example 8.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B, which owns all the one class of stock of controlled foreign corporation C. All such corporations use the calendar year as the taxable year. For 1978, N Corporation is required under section 951 to include $50 attributable to the earnings and profits of C Corporation and $15 attributable to the earnings and profits of B Corporation in its gross income. N Corporation is not required to include any amount in its gross income with respect to A Corporation under section 951 in 1978. For such year, C Corporation distributes $75 to B Corporation. B Corporation in turn distributes $60 of its earnings and profits to A Corporation. A Corporation has no other earnings and profits for 1978 and distributes $45 of its earnings and profits to N Corporation. The foreign income taxes deemed paid by N Corporation under section 960(a)(1) and section 902(a) are determined as follows on the basis of the facts assumed:

C Corporation (third-tier corporation):

Pretax earnings and profits $150.00
Foreign taxes paid by C Corporation (30%) 45.00
Earnings and profits 105.00
Amount required to be included in gross income of N Corporation under section 951 with respect to C Corporation 50.00
Dividend to B Corporation 75.00
Dividend from earnings and profits to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) 50.00
Dividend from earnings and profits to which section 902(b)(2) applies (attributable to amounts not included in N Corporation's gross income with respect to C Corporation) $25.00
Amount of foreign income taxes of C Corporation deemed paid by B Corporation under section 902(b)(2) and § 1.960-2(b) :
($25/$105 × $45) $10.71
B Corporation (second-tier corporation):
Pretax earnings and profits:
Dividend from C Corporation $75.00
Other earnings and profits 225.00
Total pretax earnings and profits $300.00
Foreign income taxes paid by B Corporation (40%) 120.00
Earnings and profits 180.00
Earnings and profits attributable to amounts to which section 902(b)(2) does not apply (amounts included in N Corporation's gross income under section 951 with respect to C Corporation ($50−($50 × .40)) 30.00
Other earnings and profits 150.00
Earnings and profits of B Corporation after exclusion for amounts to which section 902(b)(2) does not apply (amounts attributable to earnings and profits which are included in N Corporation's gross income under section 951 with respect to C Corporation) ($180−$30) 150.00
Amount to be included in gross income under section 951 of N Corporation with respect to B Corporation 15.00
Amount of dividend to A Corporation 60.00
Dividend from earnings and profits to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) 30.00
Dividend from earnings and profits to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) 15.00
Dividend from other earnings and profits (attributable to amounts not included in N Corporation's gross income under section 951 with respect to B or C Corporation) 15.00
Foreign income taxes of B Corporation deemed paid by A Corporation under section 902(b)(1) and § 1.960-2(b) :
($45/$180 × 120) $30.00
Foreign income taxes (of C Corporation) deemed paid by B Corporation deemed paid by A Corporation under section 902(b)(1) in accordance with § 1.960-2(b) and § 1.960-2(d)(2)(i) and (ii) :
($15/$150 × $10.71) 1.07
A Corporation (first-tier corporation):
Pretax earnings and profits:
Dividend from B Corporation $60.00
Other earnings and profits 0
Total pretax earnings and profits $60.00
Foreign income taxes paid by A Corporation (10%) 6.00
Earnings and profits 54.00
Earnings and profits attributable to amounts to which section 902(b)(2) does not apply (attributable to amounts previously included in N Corporation's gross income under section 951 with respect to C Corporation) ($30−($30X.10)) 27.00
Earnings and profits attributable to amounts to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) ($15− ($15X.10)) 13.50
Other earnings and profits ($15 - ($15X.10)) 13.50
Earnings and profits of A Corporation after exclusion for amounts to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) ($54.00−$13.50) 40.50
Earnings and profits of A Corporation after exclusion for amounts to which sections 902(b)(1) and (2) do not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B or C Corporation) ($40.50−$27.00) 13.50
Dividend to N Corporation 45.00
Dividend from earnings and profits to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) $27.00
Dividend from earnings and profits to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) 13.50
Dividend from earnings and profits to which section 902(a) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to A Corporation) 0
Dividend from other earnings and profits (attributable to amounts not included in N Corporation's gross income under section 951 with respect to A, B, or C Corporation) 4.50
N Corporation (domestic corporation):
Foreign income taxes deemed paid by N Corporation under section 960(a)(1) and § 1.960-1(c)(1)(ii) with respect to C Corporation:
($50/$105 × $45.00) $21.43
Foreign income taxes deemed paid by N Corporation under section 960(a)(1) and § 1.960-1(c)(1)(i) with respect to B Corporation 11.07
Taxes paid by B Corporation:
($15/$180 × $120) $10.00
Taxes deemed paid by B Corporation in accordance with § 1.960-2(d)(2)(i):
($15/$150 × $10.71) $1.07
Total taxes deemed paid by N Corporation under section 960(a)(1) $32.50
Foreign income taxes deemed paid by N Corporation under section 902(a):
Taxes paid by A Corporation in accordance with § 1.960-2(c):
($45/$54 × $6) $5.00
Taxes paid by B Corporation deemed paid by A Corporation in accordance with §§ 1.960-2(c) and 1.960-2(d)(1)(i) and (ii):
($31.50/$40.50 × $30.00) 23.33
Taxes (of C Corporation) deemed paid by B Corporation deemed paid by A Corporation in accordance with §§ 1.960-2(c) and 1.960-2(d)(1)(i) and (ii):
($4.50/$13.50 × $1.07) .36
Total taxes deemed paid by N Corporation under section 902(a) $28.69
Total foreign income taxes deemed paid by N Corporation under section 901 $61.19
Example 9.
Domestic corporation N owns all the one class of stock of controlled foreign corporation A, which owns all the one class of stock of controlled foreign corporation B, which owns all the one class of stock of controlled foreign corporation C. A and B Corporations are organized under the laws of foreign country X. C Corporation is organized under the laws of foreign country Y. All of B Corporation's assets used in a trade or business are located in country X. All such corporations use the calendar year as the taxable year. For 1978, N Corporation is required to include in its gross income under section 951, $50 attributable to the earnings and profits of C Corporation and $100 attributable to the earnings and profits of B Corporation. N Corporation is not required to include any amount in its gross income under section 951 with respect to A Corporation. Country X imposes an income tax of 10 percent on dividends from foreign subsidiaries, 20 percent on dividends from domestic subsidiaries, and 40 percent on other earnings and profits. For 1978, C Corporation distributes $75 to B Corporation. For such year, B Corporation distributes $175 of its earnings and profits to A Corporation. A Corporation has no other earnings and profits for 1978 and distributes $130 of its earnings and profits to N Corporation. The foreign income taxes deemed paid by N Corporation under sections 960(a)(1) and 902(a) are determined as follows on the basis of the facts assumed:

C Corporation (third-tier corporation):

Pretax earnings and profits $150.00
Foreign income taxes paid by C Corporation (30%) 45.00
Earnings and profits 105.00
Amount required to be included in gross income of N Corporation under section 951 with respect to C Corporation 50.00
Dividend to B Corporation 75.00
Dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) $50.00
Dividend to which section 902(b)(2) applies (attributable to amounts not included in N Corporation's gross income under section 951 with respect to C Corporation) 25.00
Amount of foreign income taxes of C Corporation deemed paid by B Corporation under section 902(b)(2) and § 1.960-2(b) ($25/$105 × $45) 10.71
(For formula see § 1.960-2(g)(1)(i)(A) )
B Corporation (second-tier corporation):
Pretax earnings and profits:
Dividend from C Corporation $75.00
Other earnings and profits 225.00
Total pretax earnings and profits $300.00
Foreign income taxes paid by B Corporation 97.50
On dividends received from C Corporation to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($50 × .10) $5.00
On dividend from C Corporation to which section 902(b)(2) applies (attributable to amounts not included in N Corporation's gross income under section 951 with respect to C Corporation) ($25 × .10) 2.50
On other income of B Corporation ($225 × .40) 90.00
Earnings and profits 202.50
Attributable to dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($50−$5) 45.00
Attributable to dividend from C Corporation to which section 902(b)(2) applies (attributable to amounts not included in N Corporation's gross income under section 951 with respect to C Corporation) ($25−$2.50) $22.50
Attributable to other income of B Corporation ($225−$90) 135.00
Earnings and profits after exclusion of amounts attributable to dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($202.50−$45) $157.50
Amount required to be included in N Corporation's gross income under section 951 with respect to B Corporation 100.00
Dividend paid by B Corporation 175.00
Dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) $45.00
Dividend to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) 100.00
Dividend from other earnings and profits (attributable to amounts not included in N Corporation's gross income with respect to B or C Corporation) 30.00
Foreign income taxes of B Corporation deemed paid by A Corporation under section 902(b)(1) (separate tax rate applicable to dividend received by B Corporation allocation in accordance with § 1.960-2(e) ) (for formula see § 1.960-2(g)(1)(ii)(A) (2) (i) and (ii)):
Tax paid by B Corporation on earnings previously taxed with respect to C Corporation or lower-tiers which is deemed paid by A Corporation:
($45/$45 × $5) $5.00
Tax paid by B Corporation on earnings not previously taxed with respect to C Corporation or lower-tiers which is deemed paid by A Corporation:
($30/157.50 × $92.50) $17.62
Foreign income taxes (of C Corporation) deemed paid by B Corporation deemed paid by A Corporation under section 902(b)(1) ($30/$157.50 × $10.71) 2.04
(For formula see § 1.960-2(g)(1)(ii)(B) (1))
A Corporation (first-tier corporation):
Pretax earnings and profits:
Dividend from B Corporation $175.00
Other income 0
Total pretax earnings and profits $175.00
Foreign income taxes paid by A Corporation (20%) 35.00
Earnings and profits 140.00
Attributable to dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($45− ($45 × .20)) $36.00
Attributable to amounts to which section 902(b)(1) does not apply (Attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) ($100−($100 × .20)) 80.00
Attributable to other earnings and profits (attributable to amounts not included in N Corporation's gross income with respect to B or C Corporation) 24.00
Earnings and profits after exclusion for amounts to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) ($140−$80) $60.00
Earnings and profits after exclusion for amounts to which sections 902(b)(1) and 902(b)(2) do not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B or C Corporation) ($60−$36) 24.00
Amount required to be included in N Corporation's gross income under section 1951 with respect to A Corporation None
Dividend to N Corporation $130.00
Dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) $36.00
Dividend to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) 80.00
Dividend to which section 902(a) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to A Corporation) 0
Dividend from other earnings and profits (attributable to amounts not included in N Corporation's gross income with respect to A, B, or C Corporation) 14.00
N Corporation (domestic corporation):
Foreign income taxes deemed paid by N Corporation under section 960(a)(1) and § 1.960-1(c) with respect to C Corporation ($50/$105 × $45) $21.43
(for formula see § 1.960-2(g)(2)(i)(A) )
Foreign income taxes deemed paid by N Corporation under section 960(a)(1) with respect to B Corporation (allocation of earnings and profits being made in accordance with § 1.960-1(c)(3) and § 1.960-2(e) ) (Separate tax rate applicable to dividend received by B Corporation) 65.53
Taxes paid by B corporation (for formula see § 1.960-2(g)(2)(ii) (A)(2)):
($100/$157.50 × $92.50) $58.73
Taxes (of C Corporation) deemed paid by B Corporation under section 902(b)(2) which are deemed paid by N Corporation under section 960(a)(1) ($100/$157.50 × $10.71) 6.80
(for formula see § 1.960-2(g)(2)(ii)(B) (1))
Total taxes deemed paid by N Corporation under section 960(a)(1) $86.96
Foreign income taxes deemed paid by N Corporation under section 902(a):
Taxes paid by A Corporation ($130/$140 × $35) $32.50
(for formula see § 1.960-2(g)(1)(iii)(A) (1))
Taxes paid by B Corporation deemed paid by A Corporation (Separate tax rate applicable to dividend received by B Corporation allocation required by § 1.960-2(e) ) (for formula see § 1.960-2(g)(1)(iii)(B) (2) (i) and (ii)):
Tax paid by B Corporation on earnings previously taxed with respect to C Corporation or lower tiers which is deemed paid by N Corporation:
($36/$36 × $5) $5.00
Tax paid by B Corporation on earnings not previously taxed with respect to C Corporation or lower tiers which is deemed paid by N Corporation:
($14/$24 × $17.62) $10.28
Taxes (of C Corporation) deemed paid by B Corporation deemed paid by A Corporation ($14/$24 × $2.04) 1.19
(for formula see § 1.960-2(g)(1)(iii)(C) (1))
Total taxes deemed paid by N Corporation under section 902(a) $48.97
Total foreign income taxes deemed paid by N Corporation under section 901 135.93
Example 10.
The facts are the same as in example 9 except that A Corporation has other earnings and profits of $200 in 1978 and country X imposes a tax of 50 percent on A Corporation's other earnings and profits. A Corporation distributes $200 of its earnings and profits to N Corporation in 1978. The foreign income taxes paid by N Corporation under sections 960 (a)(1) and 902 (a) are determined as follows on the basis of the facts assumed:

C Corporation (third-tier corporation):

Pretax earnings and profits $150.00
Foreign income taxes paid by C Corporation (30%) 45.00
Earnings and profits 105.00
Amount required to be included in gross income of N Corporation under section 951 with respect to C Corporation $50.00
Dividend to B Corporation 75.00
Dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) 50.00
Dividend to which section 902(b)(2) applies (attributable to amounts not included in N Corporation's gross income under section 951 with respect to C Corporation) 25.00
Amount of foreign income taxes of C Corporation deemed paid by B Corporation under section 902(b)(2) and § 1.960-2(b) ($25/$105 × $45) 10.71
(for formula see § 1.960-2(g)(1)(i)(A) )
B Corporation (second-tier corporation):
Pretax earnings and profits:
Dividend from C Corporation $75.00
Other earnings and profits 225.00
Total pretax earnings and profits $300.00
Foreign income taxes of B Corporation $97.50
On dividends received from C Corporation to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($50 × .10) $5.00
On dividend from C Corporation to which section 902(b)(2) applies (attributable to amounts not included in N Corporation's gross income under section 951 with respect to C Corporation) ($25 × .10) 2.50
On other income of B Corporation ($225 × .40) 90.00
Earnings and profits $202.50
Attributable to dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($50-$5) $45.00
Attributable to dividend from C Corporation to which section 902(b)(2) applies (attributable to amounts not included in N Corporation's gross income under section 951 with respect to C Corporation) ($25-$2.50) 22.50
Attributable to other income of B Corporation ($225-$90) 135.00
Earnings and profits after exclusion of amounts attributable to dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($202.50-$45) 157.50
Amount required to be included in N Corporation's gross income under section 951 with respect to B Corporation 100.00
Dividend paid by B Corporation 175.00
Dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) $45.00
Dividend to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) 100.00
Dividend from other earnings and profits (attributable to amounts not included in N Corporation's gross income with respect to B or C Corporation) 30.00
Foreign income taxes of B Corporation deemed paid by A Corporation under section 902(b)(1) with allocation required by § 1.960-2 (e):
($45/$45 × $5) 5.00
($30/$157.50 × $92.50) 17.62
(for formula see § 1.960-2(g)(1)(ii)(A) (2) (i) and (ii))
Foreign income taxes (of C Corporation) deemed paid by B Corporation deemed paid by A Corporation under section 902(b)(1): ($30/$157.50 × $10.71) 2.04
(for formula see § 1.960-2(g)(1)(ii)(B) (1))
A Corporation (first-tier corporation):
Pretax earnings and profits:
Dividend from B Corporation $175.00
Other earnings and profits 200.00
Total pretax earnings and profits $375.00
Foreign income taxes paid by A Corporation 135.00
On dividend received from B Corporation to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($45 × .20) 9.00
On dividend received from B Corporation to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) ($100 × .20) 20.00
On dividend from B Corporation attributable to B Corporation's other earnings and profits (attributable to amounts not included in N Corporation's gross income with respect to B or C Corporation) ($30 × .20) 6.00
On other income of A Corporation ($200 × .50) 100.00
Earnings and profits 240.00
Attributable to dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($45−$9) 36.00
Attributable to dividend to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income with respect to B Corporation) ($100−$20) 80.00
Attributable to other earnings and profits of A Corporation (attributable to amounts not included in N Corporation's gross income with respect to A, B, or C Corporation) [($30−$6) ($200−$100)] 124.00
Amount required to be included in N Corporation's gross income under section 951 with respect to A Corporation None
Earnings and profits after exclusion of amounts attributable to dividend to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) 160.00
Earnings and profits after exclusion of amounts attributable to dividend to which sections 902(b)(1) and 902(b)(2) do not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B and C Corporation) 124.00
Dividend to N Corporation 200.00
Dividend attributable to amounts to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) $36.00
Dividend attributable to amounts to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income with respect to B Corporation) 80.00
Dividend attributable to amounts to which section 902(a) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to A Corporation) 0
Dividend attributable to A Corporation's other earnings and profits (attributable to amounts not included in N Corporation's gross income under section 951 with respect to A, B, or C Corporation) $84.00
N Corporation (domestic corporation).
Foreign income taxes deemed paid by N Corporation under section 960(a)(1) and § 1.960-1(c) with respect to C Corporation ($50/$150 × $45) $21.43
(for formula see § 1.960-2(g)(2)(i)(A) )
Foreign income taxes deemed paid by N Corporation under section 960(a)(1) with respect to B Corporation (allocation of earning and profits being made in accordance with § 1.960-1(c)(3) and § 1.960-2(e) ) 65.53
Taxes paid by B Corporation ($100/$157.50 × $92.50) $58.73
(for formula see § 1.960-2(g)(2)(ii)(A) (2))
Taxes deemed paid by B Corporation ($100 × $157.50 × $10.71) 6.80
(for formula see § 1.960-2(g)(2)(ii)(B) (1))
Total taxes deemed paid by N Corporation under section 960(a)(1) 86.96
Foreign income taxes deemed paid by N Corporation under section 902(a) (separate tax rate applicable to dividends received by A Corporation allocation required by § 1.960-2(e) ) (for formula see § 1.960-2(g)(1)(iii)(A) (2) (i) and (ii)):
Tax paid by A Corporation on earnings previously taxed with respect to B Corporation or lower tiers which is deemed paid by N Corporation:
($116/$116 × $29) $29.00
Tax paid by A Corporation on earnings not previously taxed with respect to B Corporation or lower tiers which is deemed paid by N Corporation:
($84/$124 × $106) $71.81
Taxes (paid by B Corporation) deemed paid by A Corporation allocation required by § 1.960-2(e) :
($36/$36 × $5) 5.00
($84/$124 × $17.62) 11.94
(for formula see § 1.960-2(g)(1)(iii)(B) (2) (i) and (ii))
Taxes (of C Corporation) deemed paid by B Corporation deemed paid by A Corporation ($84/$124 × $2.04) 1.38
(for formula see § 1.960-2(g)(1)(iii)(C) (1))
Total taxes deemed paid by N Corporation under section 902(a) credit $119.13
Total foreign income taxes deemed paid by N Corporation under section 901 206.09

(g)Formulas. This paragraph contains formulas for determining a domestic corporation's section 902 and 960 credits when amounts distributed through a chain of ownership have been included in whole or in part in the gross income of a domestic corporation under section 951 with respect to first-, second-, third-, or lower-tier corporations.

(1)Determination of the section 902 credit -

(i)Section 902(b)(2) credit. If the second-tier corporation receives a dividend from a third-tier corporation attributable in whole or in part to amounts included in a domestic corporation's gross income under section 951 with respect to the third- or lower-tier corporations, the second-tier corporation's credit for taxes paid by the third-tier corporation under section 902(b)(2) is determined as follows:

(A) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(B) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(1) Credit for tax paid by third-tier corporation on earnings included in domestic corporation's gross income with respect to fourth- or lower-tier corporations -

(2) Credit for tax paid by third-tier corporation on earnings not included in domestic corporation's gross income with respect to fourth- or lower-tier corporations -

(ii)Section 902(b)(1) credit. If the first-tier corporation receives a dividend from a second-tier corporation attributable in a whole or in part to amounts included in a domestic corporation's gross income under section 951 with respect to the second- or lower-tier corporations, the first-tier corporation's credit for taxes paid and deemed paid by the second-tier corporation under section 902(b)(1) is determined as follows:

(A)Taxes paid by the second-tier corporation which are deemed paid by the first-tier corporation -

(1) If the effective rate of tax on dividends received by the second-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the second-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(i) Credit for tax paid by second-tier corporation on earnings previously taxed with respect to third- or lower-tier corporations -

(ii) Credit for tax paid by second-tier corporation on earnings not previously taxed with respect to third- or lower-tier corporations -

(B)Taxes deemed paid by the second-tier corporation which are deemed paid by the first-tier corporation -

(1) If the effective rate of tax dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(i) Credit for tax paid by third-tier corporation on earnings previously taxed with respect to fourth- or lower-tier corporations -

(ii) Credit for tax paid by third-tier corporation on earnings not previously taxed with respect to fourth- or lower-tier corporations -

(iii)Section 902(a) credit. If the domestic corporation receives a dividend from a first-tier corporation attributable in whole or in part to amounts included in a domestic corporation's gross income under section 951 with respect to the first- or lower-tier corporations, the domestic corporation's credit for taxes paid and deemed paid by the first-tier corporation under section 902(a) is determined as follows:

(A)Taxes paid by the first-tier corporation which are deemed paid by domestic corporation -

(1) If the effective rate of tax on dividends received by the first-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the first-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(i) Credit for tax paid by first-tier corporation on earnings previously taxed with respect to second- or lower-tier corporations -

(ii) Credit for tax paid by first-tier corporation on earnings not previously taxed with respect to second- or lower-tier corporations -

(B)Taxes (paid by second-tier corporation) deemed paid by first-tier corporation which are deemed paid by domestic corporation -

(1) If the effective rate of tax on dividends received by the second-tier corporation is the same as its tax rate on other earnings and profits -

(2) If the effective rate of tax on dividends received by the second-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(i) Credit for tax paid by second-tier corporation on earnings previously taxed with respect to third-tier or lower-tier corporations -

(ii) Credit for tax paid by second-tier corporation on earnings not previously taxed with respect to third- or lower-tier corporations -

(C)Taxes (of third-tier corporation) deemed paid by first-tier corporation which are deemed paid by domestic corporation -

(1) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(i) Credit for tax (of third-tier corporation) deemed paid by second-tier corporation on earnings previously taxed with respect to fourth- or lower-tier corporations -

(ii) Credit for tax (of third-tier corporation) deemed paid by second-tier on earnings not previously taxed with respect to fourth- or lower-tier corporations -

(2)Determination of domestic corporation's section 960 credit for amounts included in its gross income with respect to a first-, second-, or third-tier corporation which has received a distribution previously included in the gross income of a domestic corporation under section 951 -

(i)Third-tier credit. If a domestic corporation is required to include an amount in its gross income under section 951 with respect to a third-tier corporation which has received a distribution from a fourth-tier corporation of amounts included in a domestic corporation's gross income under section 951 with respect to the fourth- or lower-tier corporations, the domestic corporation's credit for taxes paid by the third-tier corporation under section 960(a)(1) is determined as follows:

(A) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(B) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(ii)Second-tier credit. If a domestic corporation is required to include an amount in its gross income under section 951 with respect to a second-tier corporation which has received a distribution from a third-tier corporation of amounts included in a domestic corporation's gross income under section 951 with respect to the third- or lower-tier corporations, the domestic corporation's credit for taxes paid and deemed paid by the second-tier corporation under section 960(a)(1) is determined as follows:

(A)Credit for taxes paid by the second-tier corporation which are deemed paid by the domestic corporation.

(1) If the effective rate of tax on dividends received by the second-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the second-tier is higher or lower than the effective rate of tax on its other earnings and profits -

(B)Credit for taxes (of the third-tier corporation) deemed paid by the second-tier corporation under section 902(b)(2),

(1) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(iii)First-tier credit. If a domestic corporation is required to include amounts in its gross income under section 951 with respect to a first-tier corporation which has received a distribution from a second-tier corporation of amounts included in a domestic corporation's gross income under section 951 with respect to the second- or lower-tier corporations, the domestic corporation's credit for taxes paid and deemed paid by the first-tier corporation under section 960(a)(1) shall be determined as follows:

(A)Credit for taxes paid by the first-tier corporation.

(1) If the effective rate of tax on dividends received by the first-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the first-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(B)Credit for taxes paid by the second-tier corporation deemed paid by the first-tier corporation under section 902(b)(1).

(1) If the effective rate of tax on dividends received by the second-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the second-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

(C)Credit for taxes (of the third-tier corporation) deemed paid by the second-tier corporation which are deemed paid by first-tier corporation under section 902(b)(1).

(1) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits -

(2) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits -

[T.D. 7120, 36 FR 10854, June 4, 1971; 36 FR 11924, June 23, 1971, as amended by T.D. 7334, 39 FR 44212, Dec. 23, 1974; 40 FR 1014, Jan. 6, 1975; 40 FR 2802, Jan. 16, 1975; T.D. 7649, 44 FR 60089, Oct. 18, 1979; T.D. 7843, 47 FR 50476, Nov. 8, 1982; 47 FR 55477, Dec. 10, 1982]

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly. More limitations on accuracy are described at the GPO site.


United States Code
U.S. Code: Title 26 - INTERNAL REVENUE CODE

§ 1 - Tax imposed

§ 21 - Expenses for household and dependent care services necessary for gainful employment

§ 23 - Adoption expenses

§ 25 - Interest on certain home mortgages

§ 25A - Hope and Lifetime Learning credits

§ 28 - Renumbered § 45C]

§ 30 - Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(2)(A), Dec. 19, 2014, 128 Stat. 4037]

§ 36B - Refundable credit for coverage under a qualified health plan

§ 38 - General business credit

§ 40 - Alcohol, etc., used as fuel

§ 41 - Credit for increasing research activities

§ 42 - Low-income housing credit

§ 43 - Enhanced oil recovery credit

§ 45D - New markets tax credit

§ 46 - Amount of credit

§ 47 - Rehabilitation credit

§ 52 - Special rules

§ 56 - Adjustments in computing alternative minimum taxable income

§ 58 - Denial of certain losses

§ 61 - Gross income defined

§ 62 - Adjusted gross income defined

§ 66 - Treatment of community income

§ 67 - 2-percent floor on miscellaneous itemized deductions

§ 72 - Annuities; certain proceeds of endowment and life insurance contracts

§ 101 - Certain death benefits

§ 103 - Interest on State and local bonds

§ 103A - Repealed. Pub. L. 99–514, title XIII, § 1301(j)(1), Oct. 22, 1986, 100 Stat. 2657]

§ 108 - Income from discharge of indebtedness

§ 110 - Qualified lessee construction allowances for short-term leases

§ 129 - Dependent care assistance programs

§ 132 - Certain fringe benefits

§ 148 - Arbitrage

§ 149 - Bonds must be registered to be tax exempt; other requirements

§ 150 - Definitions and special rules

§ 152 - Dependent defined

§ 162 - Trade or business expenses

§ 163 - Interest

§ 165 - Losses

§ 166 - Bad debts

§ 168 - Accelerated cost recovery system

§ 170 - Charitable, etc., contributions and gifts

§ 171 - Amortizable bond premium

§ 179 - Election to expense certain depreciable business assets

§ 179A - Repealed. Pub. L. 113–295, div. A, title II, § 221(a)(34)(A), Dec. 19, 2014, 128 Stat. 4042]

§ 197 - Amortization of goodwill and certain other intangibles

§ 199 - Income attributable to domestic production activities

§ 216 - Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder

§ 221 - Interest on education loans

§ 263A - Capitalization and inclusion in inventory costs of certain expenses

§ 267 - Losses, expenses, and interest with respect to transactions between related taxpayers

§ 274 - Disallowance of certain entertainment, etc., expenses

§ 280C - Certain expenses for which credits are allowable

§ 280F - Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes

§ 280G - Golden parachute payments

§ 301 - Distributions of property

§ 304 - Redemption through use of related corporations

§ 305 - Distributions of stock and stock rights

§ 324

§ 336 - Gain or loss recognized on property distributed in complete liquidation

§ 337 - Nonrecognition for property distributed to parent in complete liquidation of subsidiary

§ 338 - Certain stock purchases treated as asset acquisitions

§ 351 - Transfer to corporation controlled by transferor

§ 355 - Distribution of stock and securities of a controlled corporation

§ 357 - Assumption of liability

§ 358 - Basis to distributees

§ 362 - Basis to corporations

§ 367 - Foreign corporations

§ 382 - Limitation on net operating loss carryforwards and certain built-in losses following ownership change

§ 383 - Special limitations on certain excess credits, etc.

§ 401 - Qualified pension, profit-sharing, and stock bonus plans

§ 401 note - Qualified pension, profit-sharing, and stock bonus plans

§ 402A - Optional treatment of elective deferrals as Roth contributions

§ 403 - Taxation of employee annuities

§ 404 - Deduction for contributions of an employer to an employees’ trust or annuity plan and compensation under a deferred-payment plan

§ 408 - Individual retirement accounts

§ 408A - Roth IRAs

§ 409 - Qualifications for tax credit employee stock ownership plans

§ 410 - Minimum participation standards

§ 411 - Minimum vesting standards

§ 414 - Definitions and special rules

§ 417 - Definitions and special rules for purposes of minimum survivor annuity requirements

§ 419A - Qualified asset account; limitation on additions to account

§ 420 - Transfers of excess pension assets to retiree health accounts

§ 441 - Period for computation of taxable income

§ 442 - Change of annual accounting period

§ 444 - Election of taxable year other than required taxable year

§ 446 - General rule for methods of accounting

§ 453 - Installment method

§ 453A - Special rules for nondealers

§ 458 - Magazines, paperbacks, and records returned after the close of the taxable year

§ 460 - Special rules for long-term contracts

§ 461 - General rule for taxable year of deduction

§ 465 - Deductions limited to amount at risk

§ 466 - Repealed. Pub. L. 99–514, title VIII, § 823(a), Oct. 22, 1986, 100 Stat. 2373]

§ 467 - Certain payments for the use of property or services

§ 468A - Special rules for nuclear decommissioning costs

§ 468B - Special rules for designated settlement funds

§ 469 - Passive activity losses and credits limited

§ 471 - General rule for inventories

§ 472 - Last-in, first-out inventories

§ 475 - Mark to market accounting method for dealers in securities

§ 481 - Adjustments required by changes in method of accounting

§ 482 - Allocation of income and deductions among taxpayers

§ 483 - Interest on certain deferred payments

§ 493

§ 504 - Status after organization ceases to qualify for exemption under section 501(c)(3) because of substantial lobbying or because of political activities

§ 514 - Unrelated debt-financed income

§ 527 - Political organizations

§ 585 - Reserves for losses on loans of banks

§ 597 - Treatment of transactions in which Federal financial assistance provided

§ 642 - Special rules for credits and deductions

§ 643 - Definitions applicable to subparts A, B, C, and D

§ 645 - Certain revocable trusts treated as part of estate

§ 663 - Special rules applicable to sections 661 and 662

§ 664 - Charitable remainder trusts

§ 672 - Definitions and rules

§ 679 - Foreign trusts having one or more United States beneficiaries

§ 701 - Partners, not partnership, subject to tax

§ 702 - Income and credits of partner

§ 703 - Partnership computations

§ 704 - Partner’s distributive share

§ 705 - Determination of basis of partner’s interest

§ 706 - Taxable years of partner and partnership

§ 707 - Transactions between partner and partnership

§ 708 - Continuation of partnership

§ 709 - Treatment of organization and syndication fees

§ 721 - Nonrecognition of gain or loss on contribution

§ 722 - Basis of contributing partner’s interest

§ 723 - Basis of property contributed to partnership

§ 724 - Character of gain or loss on contributed unrealized receivables, inventory items, and capital loss property

§ 731 - Extent of recognition of gain or loss on distribution

§ 732 - Basis of distributed property other than money

§ 733 - Basis of distributee partner’s interest

§ 734 - Adjustment to basis of undistributed partnership property where section 754 election or substantial basis reduction

§ 735 - Character of gain or loss on disposition of distributed property

§ 736 - Payments to a retiring partner or a deceased partner’s successor in interest

§ 737 - Recognition of precontribution gain in case of certain distributions to contributing partner

§ 741 - Recognition and character of gain or loss on sale or exchange

§ 742 - Basis of transferee partner’s interest

§ 743 - Special rules where section 754 election or substantial built-in loss

§ 751 - Unrealized receivables and inventory items

§ 752 - Treatment of certain liabilities

§ 753 - Partner receiving income in respect of decedent

§ 754 - Manner of electing optional adjustment to basis of partnership property

§ 755 - Rules for allocation of basis

§ 761 - Terms defined

§ 809 - Repealed. Pub. L. 108–218, title II, § 205(a), Apr. 10, 2004, 118 Stat. 610]

§ 817A - Special rules for modified guaranteed contracts

§ 832 - Insurance company taxable income

§ 845 - Certain reinsurance agreements

§ 846 - Discounted unpaid losses defined

§ 848 - Capitalization of certain policy acquisition expenses

§ 852 - Taxation of regulated investment companies and their shareholders

§ 860E - Treatment of income in excess of daily accruals on residual interests

§ 860G - Other definitions and special rules

§ 863 - Special rules for determining source

§ 864 - Definitions and special rules

§ 865 - Source rules for personal property sales

§ 874 - Allowance of deductions and credits

§ 882 - Tax on income of foreign corporations connected with United States business

§ 883 - Exclusions from gross income

§ 884 - Branch profits tax

§ 892 - Income of foreign governments and of international organizations

§ 894 - Income affected by treaty

§ 897 - Disposition of investment in United States real property

§ 901 - Taxes of foreign countries and of possessions of United States

§ 902 - Deemed paid credit where domestic corporation owns 10 percent or more of voting stock of foreign corporation

§ 904 - Limitation on credit

§ 907 - Special rules in case of foreign oil and gas income

§ 911 - Citizens or residents of the United States living abroad

§ 924

§ 925

§ 927

§ 934 - Limitation on reduction in income tax liability incurred to the Virgin Islands

§ 936 - Puerto Rico and possession tax credit

§ 937 - Residence and source rules involving possessions

§ 954 - Foreign base company income

§ 956 - Investment of earnings in United States property

§ 957 - Controlled foreign corporations; United States persons

§ 960 - Special rules for foreign tax credit

§ 963 - Repealed. Pub. L. 94–12, title VI, § 602(a)(1), Mar. 29, 1975, 89 Stat. 58]

§ 985 - Functional currency

§ 987 - Branch transactions

§ 988 - Treatment of certain foreign currency transactions

§ 989 - Other definitions and special rules

§ 1017 - Discharge of indebtedness

§ 1032 - Exchange of stock for property

§ 1059 - Corporate shareholder’s basis in stock reduced by nontaxed portion of extraordinary dividends

§ 1060 - Special allocation rules for certain asset acquisitions

§ 1092 - Straddles

§ 1202 - Partial exclusion for gain from certain small business stock

§ 1221 - Capital asset defined

§ 1244 - Losses on small business stock

§ 1248 - Gain from certain sales or exchanges of stock in certain foreign corporations

§ 1254 - Gain from disposition of interest in oil, gas, geothermal, or other mineral properties

§ 1275 - Other definitions and special rules

§ 1286 - Tax treatment of stripped bonds

§ 1291 - Interest on tax deferral

§ 1293 - Current taxation of income from qualified electing funds

§ 1294 - Election to extend time for payment of tax on undistributed earnings

§ 1295 - Qualified electing fund

§ 1296 - Election of mark to market for marketable stock

§ 1297 - Passive foreign investment company

§ 1298 - Special rules

§ 1301 - Averaging of farm income

§ 1361 - S corporation defined

§ 1368 - Distributions

§ 1374 - Tax imposed on certain built-in gains

§ 1377 - Definitions and special rule

§ 1378 - Taxable year of S corporation

§ 1397D - Qualified zone property defined

§ 1397E - Credit to holders of qualified zone academy bonds

§ 1402 - Definitions

§ 1441 - Withholding of tax on nonresident aliens

§ 1443 - Foreign tax-exempt organizations

§ 1445 - Withholding of tax on dispositions of United States real property interests

§ 1471 - Withholdable payments to foreign financial institutions

§ 1472 - Withholdable payments to other foreign entities

§ 1473 - Definitions

§ 1474 - Special rules

§ 1502 - Regulations

§ 1503 - Computation and payment of tax

§ 1504 - Definitions

§ 1561 - Limitations on certain multiple tax benefits in the case of certain controlled corporations

§ 3401 - Definitions

§ 5000 - Certain group health plans

§ 5000A - Requirement to maintain minimum essential coverage

§ 6001 - Notice or regulations requiring records, statements, and special returns

§ 6011 - General requirement of return, statement, or list

§ 6015 - Relief from joint and several liability on joint return

§ 6033 - Returns by exempt organizations

§ 6035 - Basis information to persons acquiring property from decedent

§ 6038 - Information reporting with respect to certain foreign corporations and partnerships

§ 6038A - Information with respect to certain foreign-owned corporations

§ 6038B - Notice of certain transfers to foreign persons

§ 6038D - Information with respect to foreign financial assets

§ 6039I - Returns and records with respect to employer-owned life insurance contracts

§ 6041 - Information at source

§ 6043 - Liquidating, etc., transactions

§ 6045 - Returns of brokers

§ 6046A - Returns as to interests in foreign partnerships

§ 6049 - Returns regarding payments of interest

§ 6050E - State and local income tax refunds

§ 6050H - Returns relating to mortgage interest received in trade or business from individuals

§ 6050I-1

§ 6050K - Returns relating to exchanges of certain partnership interests

§ 6050M - Returns relating to persons receiving contracts from Federal executive agencies

§ 6050P - Returns relating to the cancellation of indebtedness by certain entities

§ 6050S - Returns relating to higher education tuition and related expenses

§ 6060 - Information returns of tax return preparers

§ 6061 - Signing of returns and other documents

§ 6065 - Verification of returns

§ 6081 - Extension of time for filing returns

§ 6103 - Confidentiality and disclosure of returns and return information

§ 6109 - Identifying numbers

§ 6302 - Mode or time of collection

§ 6402 - Authority to make credits or refunds

§ 6411 - Tentative carryback and refund adjustments

§ 6655 - Failure by corporation to pay estimated income tax

§ 6662 - Imposition of accuracy-related penalty on underpayments

§ 6695 - Other assessable penalties with respect to the preparation of tax returns for other persons

§ 6851 - Termination assessments of income tax

§ 7520 - Valuation tables

§ 7654 - Coordination of United States and certain possession individual income taxes

§ 7701 - Definitions

§ 7702 - Life insurance contract defined

§ 7805 - Rules and regulations

§ 7872 - Treatment of loans with below-market interest rates

§ 7874 - Rules relating to expatriated entities and their foreign parents

U.S. Code: Title 29 - LABOR
Statutes at Large
Public Laws
Presidential Documents

Reorganization ... 1978 Plan No. 4

Title 26 published on 16-Jun-2017 03:58

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 26 CFR Part 1 after this date.

  • 2017-06-30; vol. 82 # 125 - Friday, June 30, 2017
    1. 82 FR 29719 - Regulations Regarding Withholding of Tax on Certain U.S. Source Income Paid to Foreign Persons, Information Reporting and Backup Withholding on Payments Made to Certain U.S. Persons, and Portfolio Interest Treatment; Correction
      GPO FDSys XML | Text
      DEPARTMENT OF THE TREASURY, Internal Revenue Service
      Correcting amendment.
        Effective Date: These corrections are effective June 30, 2017. Applicability Date: The corrections to §§ 1.1441-0; 1.1441-1(b)(7)(ii)(B), (e)(3)(iv)(B) and (C), (e)(4)(ii)(B)( 11 ), (e)(4)(ix)(D), (e)(5)(ii) through (e)(5)(ii)(B), (e)(5)(ii)(D) through (e)(5)(v)(B)( 3 ), (e)(5)(v)(B)( 5 ) through (e)(5)(v)(D), and (f) through (f)(4); 1.1441-1T; 1.1441-3(d)(1); 1.1441-4; 1.6045-1(m)(2)(ii) and (n)(12)(ii); and 1.6049-5(c)(1) through (c)(4) are applicable on January 6, 2017.
      26 CFR Part 1

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