Formulas.

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 -
(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 -

Source

26 CFR § 1.960-2


Scoping language

None
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