Motor vehicle
(26) Motor vehicle. The term motor vehicle means a motor vehicle as defined in section 163(j)(9)(C). (27) Old section 163(j). The term old section 163(j) means section 163(j) immediately prior to its amendment by Public Law 115-97, 131 Stat. 2054 (2017). (28) Ownership change. The term ownership change has the meaning provided in section 382 and the regulations in this part under section 382 of the Code. (29) Ownership date. The term ownership date has the meaning provided in section 382 and the regulations in this part under section 382 of the Code. (30) Real estate investment trust. The term real estate investment trust (REIT) has the meaning provided in section 856. (31) Real property. The term real property includes (i) Real property as defined in 1.469-9(b)(2); and (ii) Any direct or indirect right, including a license or other contractual right, to share in the appreciation in value of, or the gross or net proceeds or profits generated by, an interest in real property, including net proceeds or profits associated with tolls, rents or other similar fees. (32) Regulated investment company. The term regulated investment company (RIC) has the meaning provided in section 851. (33) Relevant foreign corporation. The term relevant foreign corporation means any foreign corporation whose classification is relevant under 301.7701-3(d)(1) for a taxable year, other than solely pursuant to section 881 or 882. (34) S corporation. The term S corporation has the meaning provided in section 1361(a)(1). (35) Section 163(j) interest dividend. The term section 163(j) interest dividend means a dividend paid by a RIC for a taxable year for which section 852(b) applies to the RIC, to the extent described in paragraph (b)(35)(i) or (ii) of this section, as applicable. (i) In general. Except as provided in paragraph (b)(35)(ii) of this section, a section 163(j) interest dividend is any dividend, or part of a dividend, that is reported by the RIC as a section 163(j) interest dividend in written statements furnished to its shareholders. (ii) Reduction in the case of excess reported amounts. If the aggregate reported amount with respect to the RIC for the taxable year exceeds the excess section 163(j) interest income of the RIC for such taxable year, the section 163(j) interest dividend is (A) The reported section 163(j) interest dividend amount; reduced by (B) The excess reported amount that is allocable to that reported section 163(j) interest dividend amount. (iii) Allocation of excess reported amount(A) In general. Except as provided in paragraph (b)(35)(iii)(B) of this section, the excess reported amount, if any, that is allocable to the reported section 163(j) interest dividend amount is that portion of the excess reported amount that bears the same ratio to the excess reported amount as the reported section 163(j) interest dividend amount bears to the aggregate reported amount. (B) Special rule for noncalendar year RICs. In the case of any taxable year that does not begin and end in the same calendar year, if the post-December reported amount equals or exceeds the excess reported amount for that taxable year, paragraph (b)(35)(iii)(A) of this section is applied by substituting post-December reported amount for aggregate reported amount, and no excess reported amount is allocated to any dividend paid on or before December 31 of such taxable year. (iv) Definitions. The following definitions apply for purposes of this paragraph (b)(35): (A) Reported section 163(j) interest dividend amount. The term reported section 163(j) interest dividend amount means the amount of a dividend distribution reported to the RIC's shareholders under paragraph (b)(35)(i) of this section as a section 163(j) interest dividend. (B) Excess reported amount. The term excess reported amount means the excess of the aggregate reported amount over the RIC's excess section 163(j) interest income for the taxable year. (C) Aggregate reported amount. The term aggregate reported amount means the aggregate amount of dividends reported by the RIC under paragraph (b)(35)(i) of this section as section 163(j) interest dividends for the taxable year (including section 163(j) interest dividends paid after the close of the taxable year described in section 855). (D) Post-December reported amount. The term post-December reported amount means the aggregate reported amount determined by taking into account only dividends paid after December 31 of the taxable year. (E) Excess section 163(j) interest income. The term excess section 163(j) interest income means, with respect to a taxable year of a RIC, the excess of the RIC's business interest income for the taxable year over the sum of the RIC's business interest expense for the taxable year and the RIC's other deductions for the taxable year that are properly allocable to the RIC's business interest income. (v) Example(A) Facts. X is a domestic C corporation that has elected to be a RIC. For its taxable year ending December 31, 2021, X has $100x of business interest income (all of which is qualified interest income for purposes of section 871(k)(1)(E)) and $10x of dividend income (all of which is qualified dividend income within the meaning of section 1(h)(11) and would be eligible for the dividends received deduction under section 243, determined as described in section 854(b)(3)). X has $10x of business interest expense and $20x of other deductions. X has no other items for the taxable year. On December 31, 2021, X pays a dividend of $80x to its shareholders, and reports, in written statements to its shareholders, $71.82x as a section 163(j) interest dividend; $10x as dividends that may be treated as qualified dividend income or as dividends eligible for the dividends received deduction; and $72.73x as interest-related dividends under section 871(k)(1)(C). Shareholder A, a domestic C corporation, meets the holding period requirements in paragraph (b)(22)(iii)(F)(4) of this section with respect to the stock of X, and receives a dividend of $8x from X on December 31, 2021. (B) Analysis. X determines that $18.18x of other deductions are properly allocable to X's business interest income. X's excess section 163(j) interest income under paragraph (b)(35)(iv)(E) of this section is $71.82x ($100x business interest income($10x business interest expense + $18.18x other deductions allocated) = $71.82x). Thus, X may report up to $71.82x of its dividends paid on December 31, 2021, as section 163(j) interest dividends to its shareholders. X may also report up to $10x of its dividends paid on December 31, 2021, as dividends that may be treated as qualified dividend income or as dividends that are eligible for the dividends received deduction. X determines that $9.09x of interest expense and $18.18x of other deductions are properly allocable to X's qualified interest income. Therefore, X may report up to $72.73x of its dividends paid on December 31, 2021, as interest-related dividends under section 871(k)(1)(C) ($100x qualified interest income$27.27x deductions allocated = $72.73x). A treats $1x of its $8x dividend as a dividend eligible for the dividends received deduction and no part of the dividend as an interest-related dividend under section 871(k)(1)(C). Therefore, under paragraph (b)(22)(iii)(F)(2) of this section, A may treat $7x of the section 163(j) interest dividend as interest income for purposes of section 163(j) ($8x dividend$1x conduit amount = $7x limitation). (36) Section 163(j) limitation. The term section 163(j) limitation means the limit on the amount of business interest expense that a taxpayer may deduct in a taxable year under section 163(j) and 1.163(j)-2(b). (37) Section 163(j) regulations. The term section 163(j) regulations means this section and 1.163(j)-2 through 1.163(j)-11. (38) Separate return limitation year. The term separate return limitation year (SRLY) has the meaning provided in 1.1502-1(f). (39) Separate return year. The term separate return year has the meaning provided in 1.1502-1(e). (40) Separate tentative taxable income. The term separate tentative taxable income with respect to a taxpayer and a taxable year has the meaning provided in 1.1502-12, but for this purpose computed without regard to the application of the section 163(j) limitation and with the addition of the adjustments made in paragraph (b)(43)(ii) of this section and 1.163(j)-4(d)(2)(iv). (41) Tax-exempt corporation. The term tax-exempt corporation means any tax-exempt organization that is organized as a corporation. (42) Tax-exempt organization. The term tax-exempt organization means any entity subject to tax under section 511. (43) Tentative taxable income(i) In general. The term tentative taxable income, with respect to a taxpayer and a taxable year, generally is determined in the same manner as taxable income under section 63 but for this purpose computed without regard to the application of the section 163(j) limitation. Tentative taxable income is computed without regard to any disallowed business interest expense carryforwards. (ii) [Reserved] (iii) Special rules for defining tentative taxable income. (A) For special rules defining the tentative taxable income of a RIC or REIT, see 1.163(j)-4(b)(4)(ii). (B) For special rules defining the tentative taxable income of consolidated groups, see 1.163(j)-4(d)(2)(iv). (C) For special rules defining the tentative taxable income of a partnership, see 1.163(j)-6(d)(1). (D) For special rules defining the tentative taxable income of an S corporation, see 1.163(j)-6(l)(3). (E) For special rules clarifying that tentative taxable income takes sections 461(l), 465, and 469 into account, see 1.163(j)-3(b)(4). (F) For special rules clarifying that tentative taxable income takes sections 461(l), 465, and 469 into account, see 1.163(j)-3(b)(4). (G) For special rules clarifying that tentative taxable income takes sections 461(l), 465, and 469 into account, see 1.163(j)-3(b)(4). (44) Trade or business(i) In general. The term trade or business means a trade or business within the meaning of section 162. (ii) Excepted trade or business. The term excepted trade or business means the trade or business of performing services as an employee, an electing real property trade or business, an electing farming business, or an excepted regulated utility trade or business. For additional rules related to excepted trades or businesses, including elections made under section 163(j)(7)(B) and (C), see 1.163(j)-9. (iii) Non-excepted trade or business. The term non-excepted trade or business means any trade or business that is not an excepted trade or business. (45) Unadjusted basis. The term unadjusted basis means the basis as determined under section 1012 or other applicable sections of chapter 1 of subtitle A of the Code, including subchapters O (relating to gain or loss on dispositions of property), C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses) of the Code. Unadjusted basis is determined without regard to any adjustments described in section 1016(a)(2) or (3), any adjustments for tax credits claimed by the taxpayer (for example, under section 50(c)), or any adjustments for any portion of the basis that the taxpayer has elected to treat as an expense (for example, under section 179, 179B, or 179C). (46) United States shareholder. The term United States shareholder has the meaning provided in section 951(b).