Computation of Foreign Taxes Deemed Paid Under Section 902 Pursuant to a Pooling Mechanism for Undistributed Earnings and Foreign Taxes

.,.

i
L
I

-

Rqulbl

VUI.

I

D L . NO-

bm\edwlbr$ will be requirwd to follow
b e mi'm r d k e e p i n p rules if even 8
b g l e povemment spcuri ties d d e r
w c t j o n i s condudsd.
, . ,
.'
11. Sptcial Analysts
,. ..
: This final rule amendment d m not
miteria for a "sign; hcant ..
mwt
mulatory ectjon" pursunni to Executive

'

Od.der 12,366. The Administretive

,

February 18, 1997 1 Rules snd Regulalions

agency of 6 loreign bank and complies

. I . .

'

32 1 Tuesdgy,

wilh 12 CFX p d 12 Itor fedemlly
limnad branches and agencies oC .
fomignbanks) or 12 CFR Part 208 (for
uninsured state-licensed branches and
agencies of foraign banks1 or 12 CFR
pan 344 (for insured state licensed
branches and agencies of foreign banks);
.

. .

.
. john D,~
~jr., , ~ . b
,
generally requires h a t prior noLice a n d . Undtr Secretory for Domestic Finonce.
for comment be aIIorded
IFR & €17-3834 Filed 2-14-97; .:45 am]
adoptionof ruler by bdsnl

An [ " M A " ) 15 U.S.C. 5531

.

mLUHCFOCIL
egencies. Inasmuch as h i s final rule
memly involves changes to conform
w i t h b e rule revisions cumntly k i n g
hrvlce
.
adopted by h e federsl banking .
repuletory agencies. while not involving 26 CFR Part
any s u b s t ~ t i v echanges t o the
,
.
wgclla~ions,the notice and comment
I I Q 87Wj
.
provisions 05 the APA am upecessery '.
RIN 1 W L W
pursuant lo 5 U.S.C. 553[b1;BlAS no notice and public commenl are
Computauon of Fomlgn Taxes h e m 4
required lor h i s rulemaking, the
Pa16 Under Secllon 902 Pursuant to a
?*'-isions
ReE?J1atoy
Pooling Mechanism ,or UndlskJbutd
,ict 15 U.S.C, 601.et. seq.1, do not apply.
Tne Papenuork R e d u d o n ~ c (44i
,
and ForetgnTaxes;
..
,
U.S.C. 35~41h))q u i r e s that collections COmcuon
. . .
> irnlormetion be submitted l o the
AGEHCY: Lnternal Revenue Service (TRS].
35ce ol Management and Budgel for
T ~ S W
-ebie%v*d ~
P FSince
~ ~ ~ ~ . AMION: Corredon to final regulations.
-vision does not include any new
=:leaion of information given the SUMMARY: This document coniains a
: - ~ 4 5 ' m n l interpretahon and
correction to finat income tax .
-,?liczrion oitheir recordkeeping
mgulstions wbich were ~ u b l i s b e din the
*iremen&. t h e Paperwnrk Reduction Federal Regisier on Tuesday, January 7.
r s is inapplicable.
1997 (62 FR 923) relating to tbe
computetion of foreign taxes deemed
i s 1 of St~bjectsin 17 CFR Parl4W
paid under secrion 902.
.
5a*,
hkjng. Brokers' &'ernmen(
E F f E n r V E DATE: January 7,1997,
a + ~ e s R, e p ~ d n g
and recordkeepjng
'

;

'

5 ~O~~OWS:

A R T 444-RECORDKEEPING AND
RESERVATION OF RECORDS
1.Tbe mthority cil8tion for P a f l 4 0 4
:=rinuw to mad as follows:

Y L W E O D L ~ ~ Y

FOR FURTHER INFORMATIm COKIAM: ,
Caren S. Shein, [202]622-3650 [not e
t o l l - b e number).
.
SUPPLEMEHTAAY IHFORMAllOH:

.

.,

26 CFR Parl f

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1..

-3ackb'DUnd

The
feguletions
ere hs
subject of this correajon are under
Sedion 9[32 beLntemalRevenue

PO 87011 '
RIN 1-008

. .
Treahent oi hareh hold en of Certaln
.
Passive Forelgn investment . .
Companies; Correction
-..
AGENCY: Internal Revenue,Service ~ 1 , Treasury.
..
ACTION: COrreciion t D final regulaiions.

T h i s document contains a
correction to finel quletions [TD 8701)
which were published in h e Federal
Register
on Friday. December 27, 1996.
(61FR 66149). The final mgulations
provide rules for making a deemad -lo
deemed dividend election t o purse
shareholder's bnlding period of stock or
e PFJC of those tarable years during
which h e PFJCw a s not B QEF.
EFFEmVE DATE: December 27,1996.
SUMMARY:

'

'

FOR FURTHER IHFORMA~~ON
C ~ A C T :

h y l e Novig I2021 622-3880
(no1 a tollh e number).
-. . ,
wPPLEMEMARr

INFORMATLDN:

Backgmund
The f i n d mgulstions that are subject
to this comcrion is under section 1291 .,
of the Internal Revenue Code.
".

N d for Correction
-

Code.

Need for Correction
As published, the final rrgulations
L. S e d ~ 0 n4 0 4 . 4 j s amended by
contain an error which may prove to be
,.-.sing peragmph (a)(]) 1 0read a s
misiead~ngand is in need of
- -.\*'5'
clarification.
Rscmrds lo k made and pressrved
C
.L
:
> = v s m r i r w ~s e e u d k broksm and
. Correction or Publication
are Ilnancbl Instltulrons.
Accordingly. the publication of the .
final regulations (TI3 87081, which &re
1; Is s.;bp3 to 12 CFRpan 12
the subject of FR Doc. 97-153, i s
z l m g to nalionel banks), 12 CFR parl corrected a s 10110~s:
hi ;relztrz~gto stele member b&
oj
5 I . Q O 2 4 correctd dl
i ' & e d Reserve System) or 12 CFR
On page 940, column 3, 6 1.902-3U),
.-. 344 [relating to stale banks that are
h e six& line from Ltle bottom of the
:=ern&
of h e Federal Reserve
paragraph, be language "See 5 1.9020: IS 8.Uniltd States branch or

h ~ublishid,
r b e h a 1 regulations
(?D 87011 contains tm error thsl may
prove l o be misleading and i s in nmd
ofclarification.
..
Correction of Publicntion
.,
- - ....
Accordingly. the publication of final
and temporary regulations
87011
which i s h e subject oi FR Dw.9 6 32246 is corrected as follows:
-

7

:. . .

4

I

bbm

.-:wrements.
For Lbe reasons el oul in the
y~qblt.
17 CFR Part 404 is amended

l ( a ] ( ~3)(iii). For*'is corrected to mad. "See $1.002-1 (s)(t 3)(i). For".
~ i c b m tt
l .Slrughlm.
A d n p ChieJ.Acgulotiont Unit, hfric&nt
[=hic/Cound{Carpmte].
~ F R~ a97-38,?
f
F i l d 2-1&Q7;8:45 am)

. .

Dated: ] a n u h 16.1997.

7155

5 1.1 S

1 4

[Conmw

On page 68152. columii 3.5 1.1291-'
9, paragraph (dl(Zl(i1. line 9. I h e
language "taxable year of inclusion of
each" is corrected io mad "taxable ye.=
or years ol inclusion oleach".
., -1
Michael L Slaugbtcr,
A d n g a i e f , Regulations Unil. Arsislanf

ChielCounsel Korpomte).
IFR Doc. 97-3950 Filed 2-1
BlLUWC CODE - 1 4

-7;

&:c5 &]

lncoms Tm-Sources Without U,S.
(B) FOR3m ~ a ~ . - P a r a ~ p(2)h shall not apply unltss the perccniasr arrived a t lor
purposes of applyin8 paragraph (1) when multiplied by ~ h prccnlogt
t
of voting s t a k mnrd by
the 2nd toreign corpmn~ionin the 3rd f ~ c t g corwration
n
isequal to at l u r 5~ percent.

1%.
(c) D E ~ ~ O SPECW
M
RL'LES -For

002(c)l

p u r w s of this xction-

( I ) M.1%6
UmmBC-7Zf,
Lum~S.-Thr term "ps1.1986undisiributed w i n g s " meant
d c foreign twpwaticm Icompu~rdin accordance u i ~ h
wtllons W ( a ) i n d B b ) r r r u m u l a t t d in unable ycarr ktinning rfttr Detembr 31, -1
l h t mount of the comings and profits of

(A) *S d lk t h d the unable p u r of the fmign corporation in which the dividend ir
hrtributed, and
( 0 ) milbout dhinulirm by ream d dividmdr dinribulrd duilug such u l u b l c yra,.
(2) m-lgg6FORUCF M O M L ~ m - T h ftm "pwt-lm
fwrign income taxts" means t h t
sum of(15) the foreign h c a m u r t s with rcrmt to ~ h ur ~ s b l ey u r of tth flmcign mporatiw in
which tht dividend i s distributtd, id
(B)h e twtitn incomt tax- with rrsprct to prior h ~ p b l eyears kginning after D t c t m k r
31. 1W6, to the cxtmt such f o r t i ~ nu n t r were not dttmtd p i d with rrspcrt LO d~vrdtndr
disrributcd by the foreign corporarim in prior lrxablt ytrrr.
(3) SPECuL RULE WHERE WMETIC CORWR4TION ACQUIRES 10 PERCENT OF FORElGL CDRPORATIO5
DECEMBER31. I%.(A) IN GWEUL.-II
the 1st dry on which the wneahip rtquimmtnts of subparagraph (B)
art met with rtspeti toany fortign corporarim is In 4 t a n h k p r olruch corpwaiion kginnina
after Xkclmkr 31, 1986, tht m
J
4
1
8
6
rrmdiariburrd earninus and tht pwt-1986 lottj6n
i n c o r n c ~ xd
t ~s d focejgR
~
corporaiirm hdl be &mined by taking into account only pcriods
kginniqg on n d n h n k h e 1st b y of i h r 1st uxobic year in which such ownrrship rtquirtmcnts
arc mcL
( B )m
P aLpU1MhTs.-Tht ownership rcquiremtnts of t h i s subplragraph art met
wrtb rrsptc.1 l o any lotc~gncorporation if(i) 10 prrcent of more of the voila8 s m k of such Cwtim rorporation i s owntd by a
domestic corporation,
(ii) tht rcquirtmtntr of subxction IbK3XA) are met with respect to sucb forc~gn
c o p r a t i o n and 10prrctnt or more of the votint s ~ o r kof such fwtitn corpwrizon i s o w n 4
by another Iorcign corporrtion dcscrihd in claust(i), or
(hi) tht rcquixmenlr of s u k c t i o n (bX3K0) art met ailh ttspct ro such Iortign
corporation and 10 p r c e n t or more of tbc voting slock of such lortlgn corporation i s mntd
by another lwtign corporat~ondexrikd in ciausr (ii).

#RATION OWNS 10
IGN CORPORATION.

u m c Comunos -Fur
tart d the vot~ngr l a h of a
bt dermtd LO have p a d rhr
15-

t i m 1-1, b a r s to

~ I G I commaKs-s

(4) F

) (htrtimfttr in lhtr miion
voilng z ~ o r kof r 2nd fortlpn
1st t l t r corporation shall k

~ GIHWN ~m-IH GEKW.-Tht 1rrm "fotcign intvmt

(A)

t ~ x c s "merns any income, war pmfits, or

.,asof the Commissioner under
T h e Ikputy Commissioner for
smi ption Drug U a Fee Ad of
Opemtions i s designated User Fm
2 1 U.S.C 379h(d)l.as amended
Appals Oficer and is authorized to
ier, relating to hauthorit to
hear and decide user fee waiver eppaals.
ormiveuurhnedsf
'-

,

S"

X

7'be c ~ l l e d o nof in formation
contained In thew hid regulations baa
been reviewed cad epproved b the
Of6m of Man* meht l ~ 8&
d
in
accoldanos wigbelbo P n p e n ~ r t
Reduction Aet (44 U.S.C. 3507) under
control numbar 15451458. RBsponses to
these collections ofin formationare
mquired by the 1RS to implement the
m d o n 902 pmllng regime enacted In
h e Tax Reform Act of 1986.
An agency may not condud or
sponsor, end a person Is not requimd to
mspond to, a wllectian of information
u n l s the collection of infomation
displays e valid control number.

,

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F

~ e d e r dRegister I Vol. 62, No. 4 / Tuesday, January 7. 1897 1 Rules and Regulations

'824

~htlburden for the collection of
infomation is mnected in the burden
for Form 't 118.
Comments concerning the accuracy of
thisbudenestimateendsuggestionslor
mducing this burden should be sent to
the hternal Revenue Service, Attention:

Reports Clearan- Officer XFP,
Washinglon, DC 20224, and to the
Office of Management and Budget,
Attention: Desk Officer for the
mpement oft b ~rearmvORice
,
4
Information and Regulatory Aifairs.

.- -: ,.

current or accumulated earnings a d . ,:: 1,.
pmnts, post-1986 fomign
compute en amount of foreign tax=
fa*es .+:- =
deemed paid under d i o n 902 with
should lm reduced only to m m t tor .:'.;::resped to dividends they received h hues attributable to distlibutiws with .ye,. :.
thefweigncorporationhughthe ,
r s m to which a shedolder both b- '. ,.
parlneahip.
,
eligible to claim a credit for fo.'
r
The IRS rerzived numerous
taxes deemed paid under d o n wa*j' -;
comments in response to the huest h and in fact elects to &it
1.:
.
for the hxable p a r under
.:
foreign corpomtion were entitled to

'

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-'

-5.

:-

.

.
Backgmund
with mspeci to dividends m i v e d horn regulations has been amend& to c
w
s foreign corporation by e p a r t n d i p or the rule. Tbe requhment &at the
-Section 802 (26 CFR part 11was
0th" pass-though entity. That Issue
foreign t w
1 must be
- - '*
1202(~)
of the Tax
emended by
&form an d lggg ( ~ u b l k
~~~~,
he tile subject ofa future p o p o ~ d pmponion~teFm
the
F1 fi ;
~ g ~ ~p*jea.
~ ~ However,
~ o n s
reduced is consistent with the
100 stat. 1085),end M i o n 10121b)of
recognition
of
the
holding
in
F!
venue
legislative history of th? Tax Refom
the Technical and Miscellanwus
Ruling 71-141 (1971-1 C.B. 2' 1 that e
of 1986 mblic Law -514). The House- ':
R~~~~~~ of1988 (TW) (fublic
l a w 100-647, 102 Stat. 3242). On
general arlner of a domestic m e d
Report states that under the pooling partners ip may compute an 8 aount of regime,"[a] dividend or sub*
F
pubbsbed a
January=,1995, the
forei taxes dented paid wik m e
Inclusion i s considered to bring 4 t h it -1 - .
ofpmposed rniemding in the
to a %idend distribution fmn I lornip a pm n t a ahan oftha .cumulated
menlRedater (60 FR 1019 1co
oration
to
the
partnership.
1
.W2foreign
taxes3paid
b
y
h
e
subsidiary.";
. -933-86 (1995-1 C.B. 959)l).The
pmpovd r s s v ~ o n rpmvide pidana
is amended to define a ,''+matic . H.R Rep. No.~ 6 . 0 ~ Gong..
t h lit sess; ..
902 as
shamholder as domestic
ration
357 (1985). In addition, removing taxes
,,-ded to
wih
that "owns" the q u i s i t e votir stmk in attributable to distributions to ineli 'ble . .amended in 1986 and 1988. N~ pubfic
CI foreign cor oration rather th. o m
shsnboldm md eligible sbmbol& :;----hearing was q u e s t e d or held, but
that "owns &rect~~''
L e votinC Lock.
*at choose to d d u d fornip
is . ' .
numerous written comments Were
The
LRS
i s still considering un ' a whet
supported
by the gened m e t a g *,+:.*.
-:
received. The propllsed mgulations,
.- :
other circumstances the Evenly ruling principles of seetion wz, whi&
changes mde
in msponse
with
should apply.
presume that a dividend distribution - - to comments,are adopted in this
Section 1.902-1(a)tB) is erner..iedto
will
carry with it a ratable &are of the
Treasury decision as final -ulauons+
,-lari fy under whatciKumstancw
.
foreign corporation's taxes.If taxes paid
The principal changes to *e
pool of post-1986 foreign incon e taxes
to distributed
regulations, as well as the major
must be reduced to account foi
mrnained in the pool, eligible
comments a n d suggestions,
distributions mads in prior post-1986
shamholders svenma]ly could-iod
.
discussed below.
taxable yean. The q u l a t i o n ~*uire a
d i t s for mom than h e i r rabble pbm
reduction in the taxes pool for taxes
Explanation of Provisions
of the forsip c:
t-,
a attributable b earnings dimbvled lo
n s u l t odda
,a,,ov
heme.
Section 1.902-1
shamholders ineligible for tbe deemed
Secuon 1,902-l[a}(8)(i)i s amended to
paid credit (for example, a foreign
In the preamble to the proposed
an oversight in the proposed
.
shareholder,a U.S.individual
regulations, the IRS q u e s t e d
regulation. In the case of a disbibutron
comments on wbetber the holding of
shareholdsr, a domestic corporate
out of currant ea-s
and profits that
.
Revenue Ruling 71-141 (1971-1 C.B.
shamholder that o m s less thm 10 . Is h a t e d a "nimble" dviden$ under
percent of the foreign dorpomtion'8
2111 should b expanded to allow tams
section 316Ia)Iz) when there is a deficit .
paid b a foreign corporation to b
voting stock) and to shareboldem that
- in accumulated eadags md profib.
-am eligible for the credit but that choose post-lQ86forsim in.
consi Bred deemed paid by domestic
m m are not
to deduct foreign taxes under d o n
corporationsthat are partners in
d u d . This rule is not i n d - n t ;:. - .,
domestic limited partnerships or foreign 164(al in the year of the distribution
with Lbe gened mle o f p q p h
adnetships, sbmholders in limited
rather than claim a &it.
(~)(a)(ilthat the foreign taxes p l m w
The IRS understands that some
IM d u d to eocount for taxm - :, .
lability companies, benetidarias d
dorneslic or foreign trusts and e s t a t e , or taxpayers have taken the position.
attributable to all distributions
..
w n t q q to the position taken Sn
deemed distributions out of~SI-ZBS -;. .
internst holders in other pass-through
entities. The revenue ruling held that
5 1.902-l[a)(P] of the ~ropoged
~ n & s t r i b u t dearnings. Rather, it
. .
two 5~percentdomestic wrpomte
rsgulations, that although post-18F16
reflectsthe Iact that under
902
undistributed earnings must be d u d and these ulations,no t a m
general a m e r s of e domestic genemi
- - ,, ,. . - lo ~ C C O U I ~for d l distributions out of
doemed pTwIlh rs~psctto a nhbk-+,
.. .
~ m e n
jp that o w e d 10 p m n t of.
,

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dividend undsr

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uadisthbutml mniogs, ir - .
m m d to
thl tba e
a
n
r
w

~ n d u d d y t o a o r m n t
butims or deemed M b u t i o m
thst d u w w a n d pmfiu .nd

Wupiwthsl&in
reviadp
d r r r i d h cedifi59(c#$) and {c#2) rn 12fiNc).3 % ~ .Ior
e u m p ~ h l b o c u d a ~ l l d
foreign wrporadoa owaed N
by r domeaic a r p m t e share older aod
UIm
t b a hip &areholder. the
aa
p l s am d u d

'-i

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y b a u n t b r (0 p m n t d

R

n

,

5

whicb m y werbp wltb the b l g a
p e m d hoIdiig mmpsny r u l e ::
mdtsxm.
Sectlmn r.s0&r la)O 1) h r k~ n
sb4I8holdsmara permitted to compute
mended to &dfy that tha definition of deemed pdd ta*m with rrt~m
to
8 dlddend In W
an 316(aJa plies for subpart F and pa~sivsfore@
pnrpaa of d o n a.
sw~ tb. - inmtment mnpny inc~usimr
Tbe IRS,thenilom. brr amcludd the
d o n 902 b h i t i o n of e dividend also
revenue mlhg is not supported by
includes deemed dividend under
cunwnt law. A ahamholder ol a hreign
d i o n s 551 md 1248. -4InclLtsim t d e r ssaiwts851[a) and
personel holding m p m y &mild b .
I a3 nm not di*M.u& hr p n p s e a(
entitled to compute deemed paid 1
.
a
to arnomb q u i d to lm
sectipa 802. However, sections sso[a)(t) with w
- . ~ l d I Z O ~ ( ~ p m v i d s ~ a t d s m * d p i di n d u d ~ - i n c n a u d i r i d m b ~
under &ion 5511a). Revenue Ruling
taxes with ms
to indudom under
.
secClans SSl(a and 1293 am determined 74-59 (1974-l CB.1831 le hemby
rcrvoked effective as of Lhs date these
under s t d o n 9 0 2 in the m e m w a r
as if a dividend w a ~
mgdetims are published in tbe Ftdard

t
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rud-unb

8

925

barrlag r w a l dIationsof e a i n b p

31~(8j(if

-t#f,undMbuled
m i n g poo ~s OT k tbsa mm.
S w a n 1S2-1(0)(9), d e w

d

. $

t d e d ~eg& I Vol. 62, No. 4 I T u d . y , January 7 , 1 ~ 0 7/ RUI'B~Iand R€gulpUonn

,

hurt*

F:
F

-i

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F

- P m g o p h laW11)

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Etas

fomign e m t i m ' r mbpm F inwmr. amended lo add I aamrsreranmto
d o n 1291 and%Z.l?glJdthe
Tbs nrles p d m
a
l
propased mgulations, which provide
rl101;~tions
oleamhp and tax@ In
special rules for computing loreign taxes
5 1.m-i(a)(g](iv) and IlD)[ii) d h
regulalomhsw hen mtainsb deemed pald witb msped to
distriitioas h n s c t h 1291 funds.
in e dnal mguhtions. Them
These d i s t n i m s a m treatad as
mgtdatjons m int~nded
to revem the
divi d ~ n d solely
s
lor foreign b x credit
r e d t ia Y u I m v. Cdmmissioner, 96

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cowenter argued that the rule h
71 . ~ z - l l b ) l 4 bpmvidhg
no
that

are deemed paid with respect to

dividendr out of furrent d n g s and
profits wxan t b famipi
~
mrpration has .
no post-1986 undi kibuled earnings and
no accumuleted e, nine and profits
{ i m d l e d "nimbls dividends) canflia

purposes,buithegenerelsec;tion~2 - withthegenerdp\rp~oltbeforeign
tax mdit to pmw: ? double tawstion.
compulatlooal rules do not apply.
A mmmenter correct1 painted out
The mla is mtaiaeo in h e fiual that tbs mgulation*~
inckslm of
reguladvns for t w t aasons. Firol, tbs
d ~ m e distributions
d
under H i o n 551 lqislative history 4 the Tajr Reform ~d
beapp~dtobothprs-1aa7andpost- asdtvidendsforp mwafrectiongO2 of1986IPublicLe, €~+514)clearly
is contrary to the bo ding in Revenue
indimtw h a t Cone w was swam dthe
s986 m b l e yeam. and the
issue and agreed w' 1 the position
the decision. Ruling 74-59 (1974-1 CB. 183) that an
.hould be revised to
amount includible in gross home
' stated in the mgula
>n.See S.~ e pNO.
.
For h e mmw h t e d in the reamble
under W o n 551 le not cons!d~reda
313 , 9 W Cbng.,26 w. 321 (1886).
to be p
m&
"guletiona.
0 1 ~
decliner to do so.
- .
dividend received tor purposes of tbe
h n d , h u & enr msr c;an k
of a fmei tax d j t under
Commeoters also argued &at the d o allowdeemed paid u a d e ~he cornputstionel
d o n WZ. The ho ding of the revenue rules of seaion QOZ rhan posi-1986 precluding r a l aUoocIom of
samings an t u e s is inconsistent with - r u b is ba*d on hn a e in the 1837 undistributed 4 ~sm m or h
legl ativa hidmy of 16U.;krwign
than.zero. no taxes a 8 mmovd from
II.-B][z).
-on
1.0-(aWz)
is
personal boldin8 company pmvisions.
an sadabuss rule d e s i p d to prevent
the post-I986 IomI~ip income hmjpml.
. The Report 01 the Joint Cornmitt- on . Tbus, all oftbe foreign corporation's
the use of a-Uon
parties to
Tax Evasion and Auoidanw of the
taxes m a i n in It6 post-1886 fami
;' i m p m e a United States taxpayer's
Conpss of the united States, H.R Doc. income &es pool and m availab e to
h m i p tnx d
t pori~on.
Tim m k
ctatestbutifntaxpaerre~aivesot
- No.337,75bCong.,IrlSes~.18(t8371,bemdtbdifthemrpontionpayr ,
r x l l l m s dividend
a nmcmtroild
-mmendwd
hat sh.nhoIders of
mother diddmd 1. a ~ ~ t w
ea
a
rr 1.
'
fomi n personal holding companies nut whicb the post-3986 undisibuted
d o n W2 corporation and the
t lor fombn inmme
d-s
p l ia p o s i t i ~ m .
Commf~tqaerestsblishasthe adstenw be 81 owed a d
taxes paid by Lhe lord@ corporation
SecUon 1.902-l(c)(S)'oT hpm-d
nimn **press or-mplied sgreement that
the dividend is paid wt of the fol.e&u . with ~ p e to
H amounts deemed .
regulations m r v e d on the appbmtion
distributed. The Report gbes an to a t e ofsection 902 in sedan 304 exchmw.
dm's pensive ar high
- Commsntmrs suggested that the
t a d Q ar intern a m i n g . , ern -thnt Lhe committee ncommended
against a l l o w h ~
a &it
because "it i s . mgulations should e d h r this area by
on1 taxes imposed on p s s i v e or bi b
ri&oldiog tu Intern1 earning. w h b not admWsL~brsIyfeasible. allbough i t inmrpmting Lbe holdings in R.mm
r
n equiiabIe under dm
rdnsided relared to the dividend. T h e might m
Ruling 81-5 { ~ W l - tCB.1141, and
CRS may invoke this rule to prevent 8Revenue Ruling 92-86 [I D Q z - 1 0 . .
drcumstmcas."
W o n 551fiI provides that k o u n t o am).III addition, h e commentharebolder Imm sheltering inveshent
nwme h w by investing it b u g b lequimd to be included in the gross
argued that the mfiulationsshould state
h a t e deemed paid credit is available in
sherebolder under
I nonmntmlled d o n 902 corporatfon income ofa U-S.
&ion 551b) are treated as dividends,
bat distributes only the Invesmeat
a seaion 304 exchangebvolving a
mrdiogs to the &srsbolder, which thsn and under current law it is
foreign parent corporation. The IRS is
teats the distribution as a dividwnd
adrninlstretively feasible to allow
slill studyin tbe
and the
deemed paid taxes to be cornpuled with mgulatloas us continue to mm on
bdtered by taxes paid on the
to dsemed dividends In
o'pomtion'6 hightaxed .dive bainess
the appliation 01 sedion 902 in a
'sd ilion. the Code now Includm other
amme. The IRS hlieves that thf
d o n 3~ ex&an
anti-drfmml m-gimos,9.g.. ihc s u b p d P
m i o n 1.002-1[$9) d the p m p d
amwly d d i n d .nii-abusa NIB ism
and passive foreign investment
.
Q m p W ex- tim lo the genaml
mgulations is merved in these final
1 of 5 1.802-1 L)[O)(iv) uld (0)(10)(ii) company pmvirions. h e application of - ngulslionr The pmpoud mgvldm
.- .
T.C410[1~1],affdperclrri-@59
F.Zd 973 (I lth Cit. 19921,nmaoq. 18931CB.I , for post-1986taweble WE.
S n a n l mmnienten argued *at tho
VUI- decilion w u
and h o u l d

"P

&

d

60.I

'

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.

p

Y

,

t

P

-

,

,

- .

62,

.

provided a aass-refmat;e to @alione
under &(an 8 0 5 1 ~ )dihtWPP
to
adjustments to p s t - 1 % un stnbuted
d g s and tax- that d
lfmm rn
W o n 182 allmation nlincome. There
currently ars no wktisns mdsr
,;
d o n 905(c) addrassing section 482
allmations and the IRS,therefom. has
m e d tbis pmgm h peading
,

w &-

1987 /

No. 4 l Tuesday, January 7,

-

3

'

T

B

ea of computing the deemed pdd

?

~

~

~

o

1

~

capital gain W b u t i o n k not a taxable
dividend and no aection 802 credit is
dowabla, f b m mmmenter mah t
tbo pwliagmlee fhduding tbe Wdt
bsck rulw] shwld not r ply
.

ols d a l v l s to .dopl

%a

m of

,

07 a - d b t d
eamingn and profit8,
* ,"The
ammenter rmgg!hat the rule in the
prwpcsed mgdmtian &n mdt h~
"lded-id"
when sarpings
attributable to m e or mnm pm1887
years am elimioatd by the deBcit
-bad;
Il the deficit a y In~tbe post3986
lhmisacbanwitranbe

n

-,

r=

tbm W 8 m -1

r

-

Ii n q o p t l n g h e d o n

~

~

K

!f

#'*

~

,

. .

m-mzmm

P

capital gain distribution. f i e d e states
that a deficit WU
Im carrid back when
a ~rporntimm&ss a
distribution t o shareholders h t im a
divldend or would be a dividend if

1

-

--.:.

.-

,,

,

'

-

d o n 905[c).

S e . 0 I.
~ 902-2
A commentcr suggssfd tbat the
deficit q b a c k rules in 5 1.W2-2(a)(l)
bould be amended t o provide that a
deficit i n post-f S86 undistributud
m m b g s will not be carried back to pre1987 yon a mturer of -pita1 or

~

~@k-

QaWbenm

uted h 8 e - 1 8 a
amount L
taxable pear and rbm la a d e 6 d l .
Seetian 1.W~-l(dH31WI b u g b ti4 posl-1986 nnWW samIn s, the
da6dlmWbs&haJndua
ofthe proposed &tiis od
mhgaalidpmfibin p l a 8 7 p m t o
Enduded b tba
+ti=
delmdn~
wbsthac any d g s remain
Pmgmph (d)(s] set out rules aad
to su pod matmeat d Lbs U b u tim
axamples exmising r , p t of
. rr a girideo~TO tbr -t
them
rsguta~oryr uthority under tbs W
b
1
~
y
a
7
m
~
after
a
~
mntenm of d o n 904(d)I21O[i) to
Mt byond tbe stahto tbe ,
the dfstdbution t.r dividmd. Any
drcumstanm unds which a dividend . rama m m t b a mtum of capital
p i d lo a w w U.S. shareholder by r
snd
capital
galn. It would km
mamlled jomig~eo oration out of
Incongruous to adopt a rde rodding
earnin s accumulate wvvbila it was a
d i E f a r a n t d 1 3 f a . L . 0d&ar01
c m t m d w'g oorpomucm wiu bs
l o d l accumulatedpro U m m d s
treatd rs
bnm a
t-1989 de6dt i
s
p l e a 7 year Jter a
~noncontmd
fW2 -tion.
Mlmd b.a *a,utrtd.EdI c m y k k
Identical rules were pmpwad 1892
eliminated all pm1887 a m m d a ~ e d ,
under section -[dl. See 5 1.904--~(81[3J profits and t h e w t h distributim ware
(ii]though (iv) of the pro
beat& as bi mtum of capital.
APDtber mmmwaler argud &rt the
of n dividend distribution
interpby among 5 1.902-2(b)[l) Qmunder d o n g04(d) and are mom
1987 socumdated deficit carries over to
appropriate)y placed in tbe mgdatfoas
k o m s the 0 ning Marla9 uf p
under that seaion. ARer conslds* the 1986 u d i & uled earnings pml) md
comments mceived, the rule wiU be3 I .~z-~b]bl(l)
(nows deemed peid if
6 n d l z e d ~ p m t a f ~ e ~ a n 8 0 4 a dividend is a &bIe dividend] ofthe
rsgulmtims.
m p e d regulations,and W o n WO
i

Rules i d

902 d m

with respect to deemed inclusions
under subpan Fi mults in a d d a l of
deemed paid w e s to a U.S. sbareboldur
Lf a conmlled f o ~ corpomtlon
w
has
both a pre-1987 accumulated defidt and
post-3986 eamlngs arad profitsth8tm5
e n h l y subparl F income. T h e
commenter suggests that mgulations lm

.

The-f011owlq n t a u s roliagis' --

'.--

rayobdwafjrm ry7,199r:
,
Ruling +-59.1974+1&.
*.
. .
. ..
.
103.
,
- .
.
'
..
- - -.., - .L:.- Spsdd An*
. .-.
t t h n s h d a e 33ndthatthl. 't'
Tmasury d d o n r not a d
0 a n . ds6nsd

-.:,

,:e-7.:

ZE8e d m . mq

:

:-.-.p,,-

4

-

been dotemind' rt d o n 553Ib)d
thsAdminlsbmd;. F m m d t u ~ M ( 6: .U.S.C chsptm 51 ' bas not mpply tD Lbmi -

~ t i o n s . m d b c s u k h n o t h t o 2 -:

ze. is*, the uegulatory ~ b l l i tM
,
I5 U.S.C chapter 6) d w m a t apply. - I - Pursuant to d o m 7 8 0 S ( f )d the
ht~dRevenueCPds,tbndkaoZ. .,.-

If'

-

'

~

~v-dd*~rsealins-'r
sybmimd to tkw SmaEl
A-tlon
lat -a, -

+tiom
therulethe
mumenter suggBsts. ngress mmded Busin-

The&-otado

&
d o n s 902 and 9sU in 1986

opitrhppramfmpllbinaa

.

-- .

awsmmt:isnot q M . b h l m

issued under seaion 960 to prod&,
mlely for purposes oi tbal sectlon. lhat
accumulated delidts in -1007
accumulated profits .wl not carry orar
fnto lbe osl-1986 p d .

s p d i c a l l y to eliminate d i f f m t

'

.:

,,'

. ,

aarnIngs and profits and deemed paid

taxes computations for purpow of
d o n s 962 and 96U.M a r , la the

0t m a t e Chief -1
:'.
situadon tbe commenter e t s , the
I
t
n
h
a
t
i
m
d
l
.
witht
b
OBmt qi :.
d
t
s
are
deferred
but
not
abcoEb h
r
m. . m L y s . b . ~ t b .
Chief amdel. m.Houavar. e..
;.. .
p-lea7 e h g s and taxed i n t a d la
fmm tbe.IRSand Traedwy ',- .
corporation
enough pea-388%
. 'pmumel
gupport of its posi tioa, h e mmmentdr
D s v s n tm
c
i
p
a
t
e
d In thdr -.. r:'
sgu, &st 4 0 s 902 8slablish~d m bcome tq sEimf4ete the aocumulatbd
d
a
v
e
i
o
p
m
a
.
.
:,;.
. '. ,.
-- : .;;,.:A
deficit, any distribution or deemd
tbat minimize double tamtion by
:': .;: .+distribution will cany with it r ntabls
LW dSobm.:
allowing a taxpayer to m p u t e 8
- - :. :-. . . .L.. .-!.c . 7 .,
share0fpH-1986fumi m a t u f f S S l s f l A r r t ¶ .''.-:' . > L , ;
deemed paid md it on s m b 1 e
!k-;:;
A ammsnta q u s d Eat 11902dividend. The legislri* h3ft0~
b
m
e
m=,&prtiag&
..2r.-.:;
::
2(b)(Z)
and
Is),
Exam
Is
1,
sra
Lnwrred
indieetes lbet the pooling pmvisiom of
reg-'
-:y- - *!.,
becam they imply t s a n d defidta - -*ping
section 902 are to apply w b l y fm
- ,. ...- -- . .'_

,

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Iln) mviaand '
i
d
I131 Spsdrl e-ra

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(ti) b p k
r
b
l
,

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ddpidbym-abmb*,
f h t - i k -tion
and d - C I I

-*

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Ill hd nJa

-

.

-

(2) hlloollonruls h id&&
rtbibuhbls lo port-198Bu n d b t r b d
wnhp md p 1 W7 mmmuhtmd

Mu.

6)

dddhldendmA dport-low
tmdmbutadadnp
(ii] P d a n of &vidand out ob p-I
9W
wZmuLtbapm8t..
(3)Dividendr paid out d p l w f
acmmuhtbdpetr

IJt##-trnlnoP4

fJ tm4nd 1-41
- Par. 2. Sectlorn 1.902-1 and f ,802-2
am redesignated35 1.902-3 and 1.9024, respecrivelT;

?w. 5. M o m 1.8024,1.902-1 and
1.BOZ-2 am added to m d as follows:
Odh.d*leOoruprwfabnr

81-

*-a

- Wdart Iists tbe pmvision~under
@on
SOL.
flrn*l

~ d i t j b ? d o m r 6 b c ~

&rd&Idcr

ofa fom&

q w m t i o n fw

--

haune b e s paid by the fd

mpmh.
t.) I k W h and

a,

121 F M -

(31

s f & d n &ta

h
e
.

wh
.. .

-&

16) UppQ.m d brr-r

I?)
P m i g n hmma

in-e

(8)kst-1988h e @
111 In g s d

jI.eoH

*

occurnuloid pmfits oftaxable p a m ofthe

(1)Sspmte oPrnput&tlolumquhd fm
djvidenda h m rach fim-ti- and lowertlsr mrpmtlon.
U) R u k
151&s+=
(2) Ssetion 78 -up.

+

'

heJmJ m a f y

fmip-tion
1. 1887.

tb1 hfidtianr.
(1) -tic
*barcboldar.
(2) Pht-tior cwpntiw.
(3)% a d - *
-don.

I41 Tblrd-tiw
(5) Fom* illmum m.
161 Dividend

(I) Foreign inmme taxem dmmd p i d by r

do&
Aumholdar.
(ii)F m @ h c m m mea k o d paid hy

(7) Dividend dd
(b] Domsstlc ihnrehddst
5mt-ti- corp8tjou
(1) In g o n a d .

m uppr-tkr

ILil) Enmph.

-mrpmtloPr.

trrrr

( 8 ) w t

~

9

by
-tion.
(dl Sewnd-tier mqmnclon owdng ltoek im

kbreigntaxsrdaamdpddin
b

(

~

o

a

.

n thkd-tlrr -tian.

-

(3ICsnsnlnlla

,

'(9)lpa l

-

rod pmfib

-.

-

. -ulrtsd
,
'

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r;lltDp

a
+
-.
ffi) DishIbutimart of

-01

.

.

by lower-ti= -tion

L i b w l m yean b W g berm

January L, imf. snd Included LU t b .

-'.d?nrlkambm~,l~.

-

(WIR d d w 6w h i g n Lnrxrme w
O

(10) -1987

T

.

~

,

,

.onunularsd pm6tn-'

{i) lkhitlon.

m]pro&
-htim

ofptb.1987 ~ l c u m d t d

. .liu]Pomip hmms texn a ~ b u t a b h6
plW?didptofitr

-tian.
[I] & n d &.
(ii) Dividend M b u t i o n n out of arrnhgr
md pMts f i r a
during which R
shamholder tbet Im currsntly a
hn-w-nt

United stam

mrpwstion.
(e) Information to bs furnlrbd.

If)Erample*

.

(g) E5ectiw &to.

mtl of a

(DT~pddonarwhhmpsctto
'
ocrumdmtmd pm5tr of 8 f P I s b
corpomtion. .
k) IkWmhbtio~of m h g s ind pmtlb of

.

(4Didden&
'
(ii] f l 4 i x m t l o D wltb d o n 860. - ,
13) Dividends dlhi?&utsd
oSmxmuhtsd b e h a co~~ballsd
fmip
m r p n t i o a berame 8 cooholled h
i
p,

h h o l d t r of mntroUd b m i p
c m p m tion wm not a United Statan
mhanbolder oftbe c ~ n b H fdw d p

d prfd

f-lgtl-

'

(21 Lmk-thmugb.

-

dmh in a

(21 Amount of fmista*ts d
d paid
~ u plid
m OT --d
by a domaatic Ihnmholder.
mnnedm with the purcbrre w a l e of
(c) Fht-tier corpmtion owning & in 8
UYhh DU wad p.
-nd-tim
wrporntion.
(6)Fomign oU and grr axbedIan bmm.
tll In @ n o d .
(7) U n h d Statar &weholders dmnwolled
(2) A m o u t o f f o w twm d m a d pald

cmpalonr.

.

far
reppffl A

[U] DLeibutlom out of w m i n g s and p f i b
fel E m of d o n 482 mdfu5tmm~on
01In @ n o d .
.~aunubted
by. loraf-tiet c q x m i r m
pPrt-lW6 b l g n Income hxw md p t ( 2 ) Amount of fore@ taxas d
bitltslabbyennb@nniqbtm% .
l9as
undbwIbuted
w
d
u
p
.
by 8 raxlnd-ti= cqmmtluu
~1.n~i.aw7,rad~lmtha
le) D e M a r i o a of -dated
(dl Dividends hc6ntmlld fora&o

-

-

&dl@--

rhanbdder of u
foreign hmme lax- paid

proflh.
(51 h p h .
(cl S@l h*

i ~F-&j

~arporr-

(41 -d=
451-

md

(41 bfieftr in m u l n t e d

.

-

tomigo corpors(1) Turbls yar to which d o n pe3 h

not apply.

12) T-ble

..

ysar to which m r m 06s

appnaa.
(3) T h e and manner of making cbob.
.
(4) h b r d ~ t l a n
by a d dirrctw.
(b] h x w of bmms h m h t - t i *
. eorpotation and country to whicb tu i s
deem4 paid
(I)
S o w of incama.
,
I21 Country to which h e r dPemsd @d.
(I] United Kingdom inmme
paid with

respea lo royddm.

Q) Information to be fumhbmd ' ,
Q) murhrtiom
(I) Efiectiva W.

.

Federd Rester / Vol.

936

62,

No. 4 1 Tuesday,

Ianuary 7, fm7

I Ruies and RG~Iations

-

.

a-

--

,

*

all shambol&n Ln 1P92 (Uoe 11 d i v W. by -SOX
.
.
. . ,- , .
Lame 6).
,
-13. post-,986 fvreign income tiam paid and deemed paid b Cwpwstiw A with mpci to p 3 t - l a M L undiMbutbd
in,, dis~ributdto dl ihamhalden in 1-2 [ U a1 rnu1t1~i.d
by Lins 12).
12.peroea&.

of Corpomtion A's e - I O B 6 undistdbutod samiw p i d to

14 Post.1886 undistribrried earnings io Gwpomtion A m l aarl o i 1993 [ h e i3 minw
15. Post-1086 fomign income tsxm

Llnall)

h I2npratioa A at #tad d 1983 (Line 7 mlnua Line 13)

-

'..
m;
$121
.

---~----.i.-..,..,,,..

,,-..----..-.---,.-..

A'--'.

"P"

us ollowl:
A. arpration B (second-tiw c o r p m w
I. ~nsumedpost-1885 urdidrihod m l n g s In C a r p d m B at Mof 1991
.
2. ASpoa-tsBs fom1gn income taxes in Cowral m R at start of 1992
$50
..
3. ~ s s u m ed
x earnings and ~ r n f i t s01 C o r v t i o n 1 for 1892 ......-,....,.....,......-.......-----..A,..
14, Assumed fmtign income taxes paid or eccrusd In 1C ?
.
8[)u
5. Post-19a6 undisrributed earnings in Corporation B fo. 1992 (pra-divldend) (Line1 plus Line 3 mlnm liat 4)
6. Pwt-1986 fornip inmrne taxes Ln Cmgnration 1 fw 1992 I p d v i d e n d ) I U n e 2 p b Llnr I hamlaled w t Chs. eppm 1100 : .
primte exchmgc mtes).
I
.
7. Dividends
out of post-1986 undistribuied earnir I of Grpration B to Carpration A ia 1882
,
.
,
'1%
8. Percentage of Corporation 8 ' s post-1986 undisbibute aarnings paid to Corporation A (Unv 7 divided by Line 5)
. . .
9. Foreign inmme taxes of Corporation B deemed
by Chrpomtion A under d o n Wz(b](l) (Line 6 multiplied
, ,

.., ...............-""".---....--,,"............

,..,.........,........,........*-....--~......
,
.
.....
....................... -......................................................
,..,.,.,.

....,......,..,--..

aid

tine

4.

..,-

.

.,..
.,.,

.......,.-..-.-.-..--.. .

10.posl-r9&6 uadistributod e m l n g s in Corporation B : stad of 1993 (Line 5 minus Wae 7)
T.
1. .
.
11. Post-1986
i
m Wtc in
B at d of1993 [Line 6 minus Lime %I .......,..,.......,,.....tC..tC~...,tC.....,. $SO
8. Corporatiofi A (firsl+tler
1. Assumed post-la86 un lstributed ~ n i n g in
s Corpob. i o n A at ctad af1992
I-;
2. hssumed pod-1986foreign income ta%win Corpora m A at start of 1992
......M...-..w.:
.
3. Assumed pre-tax earnings and profit8 of Corporatlo~L for 1fJW [including 150u dividend hCorporaiAon B]
20~u
4. Assumed foreign income taxes paid or accrued by Q porntion A In 1 W Z
~[)u
5. Foteign Ancome taxes
Id by Corporation B In 199 tbat WE deemed paid by Corporation A lP& A. W 0
pan,
pnph 11) of th* E x ~ ~ L
6. Post-lg86 undistributed earnings in Grporation A for 1092 (pre-dividendl(Wne 1 plus Wna 3 minus Lim I ]
(m]
7. P&-I986 foreign income taxes in fLrpontIon A for 1992 Ipmdividendl,[Woo 2 plus Lhe 4 ~ ~ m l s mit drbm a p p m $90
pride m h m g e mtas plus Line 5).
1~ Vividends @d rmt ofcurrent earnin@ and profits 01 Corporation h TOT 1892
,
I&
9. m n t a g e of post-1986 undisiributed earnings of G r p o m t i ~ n
A p i d to Grporauon M in 1992 (Une B dividd
h 0
w a t e r of Line 6 or zsml.
lo. Foreign income t a w paid and deemed paid by Cmpr?tioa A in 1992 h a t are deemad p l d by t h p ~ ~ t i cMmmd= 0 wction # ~ I a l [Line 7 multiplied by Llne 9).
11. ~ o s t . 1 9 undrstributed
~6
8arnLngs in Cowretion A mt stan of 1883 Iline 6 mIms 111
(t4h]
tz.~0st-1~e6iortigninmmeta*csinCorpo~tionAatrlartof
1993(Lhe7mlnusLLns101
.:
(ii) For 1993. Corporation A bas SOOu of -lags
~d tofib
which it pays 16& of Inmjgn i m m i b k -&-A
=ins
no dividend, fmm Corpmtion B. and pp a l ~ a rIirldond IO Coqmmtiao u fie ~mdl.!&.*
*, -tign
M mr
vrih i t lome of the foreign inam* taxes paid end deemed paid by Corporalion A La 1 ~ 2 whicb
,
were not deemed psidvby
M in I992 because Curporetion A had no pl-fwundistributed aarnings. fbus, faF 1993, Gorporatiolr M h dm& to b a v ~
$125 of post-1986 foreign Inmme twes wid and d e e m d peid by Corporalion A md M u &
tbat lmount in
I1
dividend under sectioa 7a. dc[orminad as bi10ws:
. .1. p&-1986 undistributed earnings Lh (brporatiw A nt a
m of I s 0 3
.
.
.
,
.,
(
1.
2. post-1986 fomign income taxes in C a v m t i o n A al start 01 1983
3. ~ r e - earningsand
u
profib ~iCotporationA for 1993
-*
4. Foreign income taxes p i d or a m d by C o q o ~ o t ~ oAn I n 1983
-,,1
.

T"""

.

.
.

-............................-...............-..-....--..........
.....................................
..
...,,......-.*
,...,.,.

......................................

..

...,.,...

................ .............,...........,,....-.,.....-.-..,

,-.,
,.

,-..*-. "...,...,..

-

sm

,.....,..,.,..-.
........ . . . . , . , , ,
.,,...~,~..,.....,..,,....,.~~~--..--..~.-~,.,...,
.....-..., ...,..........,....,....
.. -...... --....
..,..
.............., . . . .
~ . p ~ s 1 . ~ ~ 8 6 u l ~ d i ~ b i b u t d ~ ~ m i n g sAi hf~rlW3[p~dividend)(Lhelplu
~rp0ra~0~
W n s 3 m I m L L w . 4 ) ,..,.,....,.

-

-

.

6. p ~ t - 1 9 6 6
foreign inmrnc tkxts h Corpomtion A for 1883 (prt-dividsodj (Una 2 plru Line I imnd8ted at &a uppmpi~te =SO

exchmnge mtwl.

-

,.

-.

.,

-

- ,

.
.

.

.

.
.

.

.

-

F d d RegMer I Vol.

62.

Na

4 / Tuesday. January

-

<

835

1997 1 Rules and Regulatinns

...

f i d c 3. II) Sin- 1987. d d l c mrponticm M has owned so p m n o
~f the- one d a l a af . ~ d
dforeign cwpwatloa A.
50 permat of -tion
A h owned by fore@ g n t i o n Z Ftx the 8airto tune p t i d . Gqmation A has owned
rn
rh. of dock d h@ -ration
4 and CorpMUoa I Lr omad M p n a n t of tbt on. c l r or aioct
zmt
@ -tion
C T b moldolag 60 prwnt of Corpwation B i t owned by C o r s i mrpmtion Y, and Ibe remaining 70 percant
d w t h n C b own& by k i g n oorporation X. Grporations A. B, and C ue not matrolled imip owpwptlons. Corpmstions
tion 0 w a f i l yetv sndhg
A. 3. .nd C usei tkr u 81 heir fundmd cummy. l a d lu
u t s S1 at dl rslmat tirnm. Co
T F e b r u a r y 1. 3ps+
ntbo C
a r la sub* rrr. di h e r wrp0mtio.s use Lba f % h r )w u the Uuble
to ~ o r p o n ~ oX.o a
15,
pp a ~ ~m*id*d
h l m d +ID(.
d i s ~ i rmings?
w ~
1lo Corpontim B
~ m . - m d B
mpb 4 sOOu dmoul oT w-3- wdistrhtd satafw anputed as of the close of -retion
B's
h d l8Ou to t h p m t i o n Y. C)n Augud IS. 1 W 2 , w t l o n A
sdsd Juns 30. 1Bs2. 12011to
ya 4
to =-tion
Y and IMU to Gxpomtion L in aanputing &ign
E d ~ n d
mt af port-1986 i m d i m j b d -inp.
d e e d p i d by Coqmations B rnd .A. raaioa 78 d m wl
ply and Corporations B and A'thus do not have to include
md @& k
fcXZYill.(
tbh d o n . Fmign b m m e t a x r k m e d paid
dm W i tsxm d.nd p i d i n
by Corpontionr B. A a d M and t
h hsp'-itopsnlw h l a a m b post-m8i5 U D d i S b i h d ssrniw and
fmign
w la -raw
B'r 6 4 Y M beginning fuly t, 1992. md mrpatian C s and -tion
Ak 1893 mlendar yearm
w mmputed u folnllom:

xtb.

2

FX&

k1

&

c

A -tion
( t h h l - a ~corporrtlon):
1. hmmecl post-1086urrdlstributd m i in Cmpmmtion C at start of LgB2
3. hsumed prt-1986 hip b ~ taxW
m In Cotpontbn C 11 aart of 1892 ,
-.
.
,
.
3.~ssumed m b mnirqp and profits of-iion
C Iw 1892
4. h-ed
$rclgn i n m e Mpaid ar a m e d in I ~ Z
5. Post-1986 undi~lributedeernlnp in Goqmmtiaa C hr lQg2 (pre-dividsnd) [Lbt 1 plus b e 3 minus Line I)
6. Pm-1986 fnreign i n m e taxes in -tion
C fw 1992 ( p d i v i d e n d ] (Line 2 plua Line 4 translated at the mppm
phte exchange rates). .
ofCwposetion%w ( h p d i o n 0 in 1992 ............................
7. Dividsnds p i d out of pH-1986 nndimibuted tartli
B (Wnt 7 divided by Line 5)
B. Pernu*
of Corporation C s p t - 1 8 8 6 undistributa earnings pnid to -tion
. . 9. F m @
income taxes of C o r p o ~ tCi ~deemed peid by Corpwdtioo B u m k sedion W)(Z)
(Line 6 multiplied by
l h e el.
10. Total &.idends h i d out of pt-1986undistrihtei m-ninga of CoC to all s h a r e h h in 1992
11. hroentagn of Carpmtion C'S p t - 1 9 8 6 undisbibv d earnings plbd w ell rbareholders im 1992 (Llnt 10 divided by

.,.,. ....,..,....,...,............................
.
.,..,...,...,...-...-.- .........................
..............................
...................--..-.,---.,..-....... ..
........*.*.*........... .....-.--*----,.+..............,.. . -................
..................

13Mh1
$500

5 m

30hl
1500u
$800

....

7

150u
10%

.-........

$80

.....................

t i n e 6).
h e b
12.
- I 992 [Liw6 mu iiplicd

m tmm @ with mpd
P
by Line
13. Post-f086 rradisbibuted earning In Corporation C

to M + l W
rmdbtributed earnings distributed to all ahareholders in

11).

14. M-lgfl6 forsign boome taxes in Corpwatioo C rt

..............................................
...................................................
on 3 as of j d y 1,1991 ............................ ,
.
.
,
...........................

1266.66

L. rtnrt of 1893 (Line 5 minus Line 10)
r lil of 1993 (Line 6 minw fine 12)

'B. Corpmtion B (mnd-tier corporation):
I. m

1
3533.34

d pst-lQ86undisiributed earnin& in CorpOr
0
a * ~in Corporati 1 8~s of July 1, l W l
o
3. A m e d pretax w i n g s and profib of Corpomtiot '1 for f i s d p a r snded Iune 30, 1992. (including !Mu dividend ~ r n

........................................................................

. 2. hrsumsd post-1986 foreign income t
.

5OOu
33.33%

~ 2-e
meaupdd ar accrued
mby C" 3
A
~ B ln fiscal year
~ ended June30, IODZ ..............................Pmign into& taxes of w r a t i a n C deemed bnid ? y -&ion
B Its fiscal year ended rune 30, 1992 (Part A.
tIas 9 af para ph [ i ) of this Example 31.
B tb .idyear mdad Juna 30, 1992 (pre-dividend] (Line 1 ~ h r Line
r
6. P o r t - t ~ 6
.Pmiw im
3 &us Ulw 4Z
w e s in C o r p o ~ i b
a for f cal
ended Iuns 30. lwz (pre-dividend) (Line 2 plus Line I
7. pmt.isll6 bmign

.,

~

5.

uaE&t+

m

u

$80
EKIOu
SZ8O

............

to -tion
A on February 15. YBPZ
IZO~
ymr ended Iune 30. 1992, paid to Corpontion 15%
A (tiw 8 diyided by Line 6).
10. F o r-7
o h lamme taxes mid lod dwmed paid by Corpor&on B as of June 30. 1992, dwmed wid bv Cornration A
m d n d o n OOZ(b)(l) &inn 7 multiplied Sy L&6 9).
11. Tam1 dividends p i d out ofpost-1986 u n d i s ~ b u t d
earnings of Carpwetion B for fiscal par endad june 30,19S2
.12. finsatage of Cwporation B'a post-1988 undis@ibutedminp Cor 6ml year ended luuc 30,Y W ~ Zpaid
,
to all sham. h l d m (Line 1 1 divided by Wne 6).
.
v
15. M-I
986 b e ' n Income taxes paid and k e d i i d *lib mspect to p t - 1 9 8 6 undisbibuted sarnings distributed to
nu .IMhol&n3uMs copontion 8.1 f i a l year ended june 30. 1W? (Uoa r multiplied by Llne 1.).
14.Paa-19Mudic~but~dearnings
in-retion
BaLofIuly 1,1992 (Line6 minus Wna 111 ,
f
Post-1086 k i p inmme tax= in ( h p m t i w l B W of jdy I, f B92 [Lima 7 minus Line 13)
.
C Corporalion A (firsl-tiur
1. h ~ m d
pa.19w
a m i n p in W U o n A at SM
of r m ..,.-....-.....---.................w..............
2:Assurned poft-f986 foreign incornekxesh -ration
Antstartof ID02
.
,
9. h m m d *tax ewniags and profits of Corpomtioa A for 1992 (including 120u divldend horn CorpDratlon 8 )
+. m c d kreign inmrnn &xs p.id n ~
* by Corpontio.
d
A in 9992
5. pareign i n m e taxes paid or dwmed id by Corpomlion B os of June 30. 1992. that am deemed paid by Co'pomtion
A In 1992 (M8, Line 10 of ~aragrephti) of this Example 3).
6. Post-1986undistributed m i n g s i n Corporation A for 1902 Ipredividend) (Line 1 plus Llnm 3 minus Line 4)
7. Post-1986doreign inmms taxes in GqomIion A fur 11892 (predividend) (Line 2 plus Lint I translated at the appm
.
p r l a b t x c b m p rates lus Line 5).
8. Dividends p i d out orpt-1g86 undistributed ~
m of -bhbn ~
A to ( j o - t h
M on August 11. 1992
9, b m n t q e dCorporation A's post-19W undistributed earnings paid to Corporation M in 1992 (Line 8 divided by Lina
-

-

-

-

-

-

-

..,.

+

x~EL

.

..,.................................,..
., ......................................

........,.................... ................................ .....
..............
................................................. ......................
..:..............

..............

ah

10. Foreigi int u e s p i d and deemed pald by Qrpomtion A in 19D2
-ion
9021a) (Line 7 multiplied by Line 9).

-s42
- -

300"
37.596

5105

mu
f 17s

2 m
$100
2-

10Ou
$42
400u

SZ~Z

Imu
25%

h a t are deemed paid by Corporation M under 560.50

13. Total dividends paid out of post-1966 undisbibuted earnings of C~rpomlionA to all shareholders In 1892

....................

200u

.

934

Na 4 1 Tuesday, January 7,
----

~derd
Register / Vol. 62.

1997 1

Rules and R&lations
..

LO Corpo~ationM and -tkm
2 h 1902 -..
or within the shareholder's texeMe year. ICoqmmtion M use the mlendw p w 03 tbs
taxnble p r . lo I 982Grpwetion A pp r
Under w p p b IsXaHilil ofrhlr d o a
.end for d u d i o n in fie amount of
3 h dividend out of y&-lM6 undiabibuted
Corpwatio~A must rudua ta p m . 1 ~ * > -foreign incoma taxes paid, aahled, or
samhp. 3u to Grporetion M and 27u t o
hreign h c n m e h m -'of Jan1,1983. . .
d-rned paid for iailure to furnish thr
Coqmntion Z Corpwatim M ii-,
by t
h a m o u o l d f bmamta*mstbif
~ ~
--- ' '
q u i d infometiun,4as sedion 6038
under m
b b)of lbio &ion. to havo
w m m d - e d p e i d ~ ~ b ~ . n 1d- - ~
and the mgulrtions under that section.
paid Iportion of the pt-1986k i g n
t h e r m ~ t o f E a n i l a r x r m e' - ~ ~-.~
[fJ Examples. The following examples Inmme tax- pald by CorpotablouA a d -,
w o u l d h s v e k n k ~ p . i d b y ' :;. ...:...
--...
iilwlrere the applicstion ofthis section: indadw t
h a r w ~ nof
i
tax- d e a d . s i , ~ I i Z
0 hPd
~ CarporrrtioD 2 br;m '-, . -,- paid in grim Income under d o n 78 w m
fiomple 1. Since 1887, domestic
eligible b -puts
M lmount o
f:.;:
-'
dividand. && the fwrelgn tax- damd p i d i n a * n s t a x m d d p a i d w l t h ~ b . T:~; ~ ;
10 perasnt a i t h
-tion
M bas
to
4
and
the
dividend
would
be
rub
one cks* of stmk of f s i m c ~ t p m t i D nA.
the dividend midh w a r r A
.
T ~ mBi n i n g w peraentofC6mtlon h ' ~- meparub h i b t i o n fur d i v i d c i n r k n
Corporation A. n nonmabollsd d o p B[la . Fonigo I n a w e b = d m . p . l d b y ,'-. ,.: s1o3. Is owned by 2. a fomign ~oqmalh,
A%
--:.
mrpomtioa. Undw p r a p p h (aX9Hi) drbb coqmmlion M.UWI-tion
Corpaation A iroot a controlled bmiiga
,
Isctio~.CruparatbAmurrdllcnitsport- tadmars in pl-1966 uqdk-tsd
corporalion.Gvrporetlm A umm the u a* Wa
d
fmipW v B r
- lsB6 undistributed uamings a~ oflanumy 1,. a ~ post-10S6
fuoaional cumncy, end ?um p l a $1 st dl
mmmputsdrsbU: ,-'., , - . I W ~ by
, the tvial m
t oidividendr peid
mleranl times. 80th m m t i o n A m d
. . ., . .. . . . . . . -.. -. . . . . . . .
1. Assumed p s t - Y 98B umdiatributed earnings of Co-im
A nt stafl of 1992 -.I~CC-.~...~-~-------.
ZSu".' ,:;'. '
of 1 ~ 9 2..,-,l.-,.,,,-:------.---;a . -.v ' .
2. hnumed p t - 1 9 B 6 k i p i u a m e tares of -tim
Ad
;
,,.,,,
,
. #)u,.,,A: . . . .
3. ~ w m t d -w samtogs and p d & of Corpwstloa A bt 1992
4. ~ s m r n e d
1m-e
taxes p i d n r a v e d by ~ a p o n t i o nA in.r
.m
. . .-.--..-..-..-.-.^
..--...-..
. ,
.yu. i..
S. P m t 4 ~ 8 6undistributed ~ m l q h
s Cargoratlon A lor '1082 (prc-dividsnd) W s . 1 plus h r 3 m h w b e 1'-,).,.,.
:-*. >.
8. m - 2 9 8 6 fonign l o m e tsxe in Carporntian A hr 1992 (pre-dividend) (Line 2 plw Lins I -tad
at the rpppriaw:
. -.- ..:!exchange ralesj.
. .. 3,
,
,,,.,
,,-.
. -- :
7 . Dividends phid out of pH-'1086undinribuicd W
n of Corp~etionA to k p n t j o n M la 3p92 ;,
, .s) ,
'5%
(I. m w of ~ r p o r a t i o pA's pmt-1IU6 undisbibuagearninp paid to Corporetloa M ILhs 7 divided by,tlw
A d e e d paid by Corporatlon M under d b n 902(u) (Line 6 multiplid by L b u 8 ) ,
.
9. Fami@
hwm of
,
,
10. ~ o t di*idsnds
d
wid a t dp&1986 undishib~iedearPIw olCorporaLton A tor ll rbarsboidrrrs in 1992
11. fircentage of Corpcua: ,n A's post-I= undittributed aamiw paid to all nhareholdera in 1992 (h
to dividsd by &

.

-

.-<,

6ip

-,

,-,,...,,

-

A

% -

,.,..,,,,,

5).

12. w - 7 9 s foreign ioa ne tmts J d with
~ W (Una
Z 6 multiplied ~y Woe 117.

mpct to pst-1086 undirtribuhd a a r a h p dltblbutsd b all a h a r e h o h

13. Qrporatioo A's post-: 96 undisbibutsd earninga at the etart of 1993 (Une 5 minus Una 10)
14.corporatian A's pml-I' 16 fomign income t a m s at the EWl of I993 (Line 6 minm
12)

.....................

-

.

.

-

. .
. . .-

. .

-

-...,..,,.,.,.,,,,,rporpo.rporporpo.

.-

$m -

,>

.

-

fiornpls I . (I) The h s am the same as in &le 2. except tbaf C o r p o d ~ nM bns rlco m m v d 10 m
t ol
b.
tioa 8 since 1987. arporatiaa B U m i the duudar p a r M tho b b l e ysar. The r e m l n b
of I l ~ Lof h i g n w
prrroaat
of &rpo*tin 8 . 8 stmy,~
owned by CmpDralion Z. Coqmnlion B i
.mi a mntmlled h d g n c o p n t i m . Co-lirn
u as itd fuadional c u r r ~ ry. end 1u equal4 $1 at a11 mlevant timla. ID 1892 CorpPnUha 5 bar wtrniw md pm6b md pays .
income taxes, fi pr ion 01 which a m attributable lo high withholding tax Jnitiast, aa defioed in M i o n W(d)(Z#B)(i). Corparatim ,
B must reduce its p l r post-1986 foreign income ta*BS by the amount of tax h@ on bigh withboldin8 tax j n m h
'
ta* for purposes of Bectiwr W2. Sce d o n W[dj(Z)(E][il) .nd w p h
or 5 percent h a u r n th' amount Is not treeted os
(s)[aniiil of this section. -.arp~tationB pays SOu I n dividends i~ IW2, 5u tn Copretion M md 4Su to -tion
2,Corporatlon M must cornpuie its mcli r BOZla) d-med paid taxes oepirately for tbo dividcnds i t receives in 1882
A fas
in homp/e 1) end fron Coqnor~tiun8. Fomjgn locome taxer of Corporation B deemed p i d by C o v t i o m M. 4 -tim
B'r opening balanc@ in pr t-lN6 undistributd earnings nnd post-1986 foreign Income taxes foa 1993 we mmpuGd us follows:
I. Assumed post-19116 und'rulbured earning of h - p r e t b n B at Mart of lm2
-.
.
,
(la)
2. Assumed port-1886 Tot* gn income tamus of Gtporation B at aert of leg2 ...................................,.............
a
3. Assumed pm-taw earnings end profit8 of Corporation B fpr 1992 (Including Mu of high witbblding tax L n k w
~ which
5" of tprr i s withheld). .
s m e d by Copration B
1982 ................................. ...-................................. ' 102.50~
4. Assumed famign income lanes paid
.
5. p&.1986 u n d i s ~ b u t dearnings In Corporation 3 for 1992 (pm-dividend1 (Line 1 plus Line 3 minus Line 4) ..........
16. m o u n t of loreign income tax DJ Corpomlion B h p w s d on high withboldins (ax (ntemrl In exof 5% [su withholdtw 2 . m

........ ..............,.......... . . ...... . . . . .

l e x + j % x ~ ~ uhQh withholding t a r in~emstj).
7. b t . 1 9 8 6 kmlgn Income taxes in Copratinn B far 11692 Ipdividendl (Uns 2 plus ILim 4 mrnru

r

6 hmal.t&

m#

$la

a w p r i e t e c ~ c b ~ ratell.
np
8 . mvidends peid out of post-1986 undlwbuted earnings to -ration
M in 1982
SU
9. Pemnhge of Corpmtiolr 0's we!-l986 undistribtcd d n 8 s wid to Carparation M [Wnr'B dividad by L1- 51 .
,.,..l.,.
5%.
10. ~oreignincome taxes oi Corpomtion B deemad paid by Cwpotatinn M ~ d e seaion
r
802(a) [Una 7 multlpIkd by
gp..
11, rotel dividends paid out of post-1986 undistributed eamngs of C o v r a t i o n B to sll shareholders !n 1982
,
.
12. Pmrcsnwt 01Corporation B't pasl-1986 undisbibutd earning6 p l d to 81) r h a m h o h la 1992 (Lhe 11 dlvidd by

,,. ................. -

..-.-.-..TB.TBTBTBTBTB..-TBTB-,TBTBTBTB

:=

..,.,.,...,..

51.
13. Post.1986 foreign income taxes nf Corporation B pald OD or 4 L h e p c t tn p l - 1 8 8 6 ~diatributedaarnl& diehw
I
all ahereholders In I992 [Line 7 multiplid by Line 12).
14. mrpration B's p o s t - l w undistributed -log#
at stan or1993 IUne 5 minus Line 11)
-.,---.
15. Cwpomtion B's poet-1986 f d p inmmc taxfs at rtart 91 1 8 8 3 (Une 7 r n h ~ 13)

-,.,.,-.
.... -.,,

$50

. . .
,
.
-

.

. A

......

,

[ii) F O ~ 1992,us computed in Exomple 2, CorporaGon M it d-4
to have paid $2 of the p t - 5 9 8 6
jnmme t&
@
dividend under redion 78. Both Lho hcome b c l ~ ~ w
by Corporation A and includes 5 2 In g r m s income
d f i Im
to a sepsmte )imitation lor dividends h r n C=opralim A.
aonaontmlkd setion WZ ctqmmt;oa w n t l a M also P
deemed to have paid 55 of tho m - 1 9 8 6 fomliyl income b e s paid by Corporatiw B and indudes $5 i s
b
e& d
dividend undtr ~ s c l b n78 80th the income inclusim and ths fornip taxw d a d p j d ue mbJsct lo #.rew& [ i d b ~ faa
dividend, from Go~purntioo8 , n nonwalmIled -Ion
MI2 c o p m l i o n .
.
,.--.
-. -

FcderaIPsgiMst / Vd. 62,No. I I Tuesday,jmmary r ,

-

--

-

mc

antities witbin tbe meaning ofS 1-.
s(I), &e foUowiag rule applim a
dividend is paid out or post-1986
undistributed w i n g s or.pre-l!387
n u h o d profits of the upper- or
lower-ticr conlmI[dfornip oarporntion
ofthe m
~ of l n ~~i n mi a a
~
attributable to mom b a n one sap-(*
dwmed paid with mspect l o forsign oil ategary uder d o n ggg(d), he
a n d g a s e x b ~ i ~ n b~ ~ ~,o ~f ~~j ~ j n , - o m e t r - d - ~
907181and ibe ~ g u l d o n r
under h t
pid by
dnank shmholder or(h.

dmtbsdividendlmdsr
m p p @ # I ) uf ibis a d i o n d B 3 0
i0~50%[7Su1150ul) and includes t h l

R"

-t
10
-I
undcr @a
78 as
liddead h w 2Su d the 7% divldsnd
Uaibd SUIW
i
mto P.$10
~ ~ 3 - 3 3 % 1 2 S d 7 5 udl lthe
78
videod will tu bwted W S r w
m j ~ u. .
~
~
&
P
~
l
j (7)United
j
dStates~shPtPholders

.

H21.

uppor-Liar caporation under d o n

P W P ~ dms w o n
shall be computed separsrely with
t o the post-1086 undistributed
aamb~
or pm1987 a m m u l r l e d
pmfits in ~ c sepsratb
c a l aut~ of

re, n corpommns6

,

~&ditOb,e~@inwmer&~he mom9 of ocditnble foreign
~ m m etexff under d o n 901 &dl
dude, s u b j to *e b i l & b n a and
mditiow ofd o n s 902 and 904,
,reign i m m e taxes actually paid a d
eemed p d by domestic &amholder
h a t m i v e s a d l v i d e n d h h Grsl-tier
cqmmtion. Foreign incometaxes
;eerned @d by a domestic sbmholder
lnder paragraph [b] of his m i o n shall
m deemed p d
the d o m d c
,barebolder only or purposes 01
mmpuhg tbe Tmlgn &w a d i t
d l o d undar mica 9r 1.

"r

A

Fmim mine& jr)r m e .
'omim hrxmms, war pro. s and bxcoas
pr06ts taxes- paid or EL md with
.-ped Q fornip miner I m r n e wiH
mot be m s i fmrk -income taxP 2. % d o n
lor-p
oi
gDl(e] atrd 5 1.801-3.
(31 Foreign taxes paid t accrued in
ronnedion with Lhe pun rose or sale OJ
(4)

ceriainoi!ondgas.Cartr ~Lncoma,war

pmfib, or ercssr profits LXMpaid or
m e d lo a forei mu ry in
-nection.witb
e pu base and i d 9

k

Fmign tams d-med ,. ild
by d o m m c sbarebddt- or
u p p t i e r ~ ~ m dtb
~ =o
resto a sepamte mtsgory under d o n W[dl

.ma,,-.,,

wiU DM

- "Oil

uahdlsou).bUnited Slntm
-a
IO f. P c w n p u t s ~krabn tuss

d

.

m e d b that w h y
consided fomige i n m e
m a s lor p u r v of rodion 902.See
aection B01if).
(6)Fmign oil and P cxtm*n
imme. F w - r u l ~
mlalhg to w d ~ d m

kb P -$~ma In IOg2. Umdrrr $ t .Prrr w ~ h i r of
d the diddsnd or 25u

1#4).

1-3,

902 ~b

pn&g]Jlhi..rtimmd
.
e i o n s 960 and 5 ~ and
3 tb
nsgulatiPas-1
base
k
special rules relating to hea p1i-m
d o . wz r.rnmputins
h w m e taxer deemed paid by Unit&
Stales shareb~ldersdcontrollsd foreign
~orpomtioaa

pm

whlch tbs dividend i s paid. Sn $1.-

a d parapph (dI(21 ~ f t h i ~
seclion. Tlie separately cornpuled
deemed paid taxes shall be added to
otbsr taxes paid by the U.S, shamboldar
or upper-tier corporation with respect to
inmme in the apprnpriate separate
5b)[4)

( 8 )Crpdii for jweign tmes deemed
paid in a section 301 imnsaction.

IRwmedI.
( 0 )Effect o l d o n 182 adjustments
on post-1886 fomjgn i n m e taxes and

-tsgoq.

st-1986 undistributed earnings.

PReserved].
Id) Uividendsfrom ~ o n t d l e foreign
d

-

~ r n i i o m + l l Genera! rde. Excapt
ss pnmi8ed in p a m p b (d3(3) of l b ~ s
rmiion, Urt dividend i~ m i v e d by a
domeaic shareholder that is a United
States sharebolder (as defined i r m i o n

,

(2) h k - f h r 0 ~ & 4 l Dividends.
]
Except as ohmiss provided in
pafagaph (dI(31 of M s d o n , m y
dividend
Out a f ~ w t - l m
undistributed earnin s of o lwk-tBmugh
e d t y to a d a t e d loo -thrPugb entity

f

shall be deemed to be aid pro rate out
of dsparale category of income. See
5%1.904-5(~)(4)and 1.904-7. The
s5lb) or sect;m 953(cMl)(A)) from a
first-tier corporation thet is a controlled portion of fie foreign income !axas
eMbu~b1sto a particular repatale
foreign corpora tiun (as defined in
srsction957falorseclion953(c1(1)(B)),or ~ ~ t s g o r y t h e t s h d l b & e m e d p i d ~
the d ~ r ~ e ~shamholdttr
tic
or upp-tier
by an upper-tier corpozation ha
lower-tier mrporation if the
corporation must b cornputad under
corpomlions
wlated look-hilgb
the f o i l o m h u l a :

Posl-lsB6 foreign income tax* of first-tier or ~ower-tier
corporation
n
allocated m d sppvrtioned to 8 aoparate cat- x
egory undar 5 1 . M

Dividend mount artrib
utable to s separate category
Post-lg86 undistributed
earnings of first-tier or
lawet-tier co ration at-

vib"l.bl.

,ox..pMrr

caregorly
- ,
.

.

(ii) brdinsiTon wjtb w o n 480. For c o n h l l e d foreign amretion shall b
treated as a dividmd from a
rules doordinstingihe computation of
noawntrolled section002 cotporntion
bmign taxes deemed pay wiLb ms*
10 moutlts includsd in p s s inobma
regardlegs of whether the earnings wrm
under section 8511a) and dividendP
ac-ulatad
in a taxable ysar bgimng
distributed by r contmlld Zomlp
before lanumy I, 1967, or afisr
EorpomUm, #a 4- 860 end the
k m b e r 31,2886.- ,

h ~ t i ~ under
n s that secdon.

T3) Din'dends disLributed w r of
wmings aceumubted beJoma

Oi) Dividend di&burions out of
a m i f l and
~ Pmflm .for PQr
d""ng
Q

Ie) lnjomation to befur~j~ed.
1fthe
m d i t fof fomign h a m s t a m clairnd
under section 901 includesfbmign
income taxes deemed paid undw
802 and paragraph &I of this
d o n . the domatic shareholder must
fumlsh &e same infomntion with
tespm to the f0~1ig1-1
Incume.taxes
dsamsd paid a jt
to alrh
with ms ct ia the foreign i n c m e taxes

shohu~der~~tishlm
0 d ~It dimdrpaid

or amrued and fnwhich
m o ~ - t h o n - m - ~ m nvniLed
t
Siotes
the m d l l is claimed. See 5 1.905-2,For
s h o d ~ ~ l d e r ~ ~ ~ f l ~ d f o oho?
r ~ informatim
n
r e q u i d la be
c 6 p m f i f i nws not a United States
hmjsbed by the domeslic shamholder
-trolled forejp -fs!jm
out
a semings smumulsiud bohm Ihe
shornhoderol~hecon~~~edforeign fottheannt~s~amountingperi~oi
wn~lledforeignmrpom~io~becam'e~
corpomtion.[~=rv~l.
certain fornigh corpmtions ending with

mobll&f~r&n mrpomtion M

eo

cunholted foreen clorpomfi~n---(il
@ne&
rule. Ao y divideod distri but&

"r ,
0

~ e d e r d~ e d s t e rI Vole 62,

932
--

1986 undistributed earnings and
accumuleted earnings end profits.
( 5 ) E x ~ ~ r n pThe
k . follow. ng exampies
illustratetherulesofthispampph(b):
Example 1. Domestit wrpomtion M owns
100 p m n l of foreign curppmlion A. Both
Corporation M and Corporation A use the
. mlendar year as the laxable yoar,and
u # ib fundional
C o r p ~ ~ L i oAnuscurrenq.Assum8th~lusguab,51al8ll
relevent times. A l l of(;orpomtion A's pee-

-

1997 1 R U ~ and
S
Regulations

. bave paid any of the foreign taxes peld by
to amounts excluded h m
j
m
ration A becnuw p t - 1 9 8 6
- under d o n OsQ(b]), onY foreign
- - .f,- .
u n z b i b u t c d urnin#and the sum
income taxes deemed paid by a
, :. Nmntplusaccumu'a'd~min~snnd
domestic shareholder in any tmbte
p m f i u a m l l ~ u ) . T h s d i v i d e n d d u ~ ~ tyhn r u n d r H c t i D n m ~ a l ~ a d p
-1888
uodistributtd sarnlngs and
accumulatedmmings and profits. ~ h f o r e , (b) ofthis d o n shall bs Included
-i
income of the dome&c
- , ;, ..
o i w u q I , 1993,Corporation A'S post1986 undbtribu~ode e r n i w ars ( ~ m l a n d shaleholder for the year u a dividend . ;
its rchunulated earninp and pmfitr am
under +on
?& Amouqe kldd j& - - '
[1~].GrpwationA'1pt+1BB6l~iga. g m h m ~ u n d e r ~ 9 n ~ ~ ~
income tPxaa at tbe slart of lW93 are $40.
~ 0 f d o n 8 0 4 , b e d e e m e d ~ -horn mu- nitfin Le -;. .
[c) specWm~&l) S p M e
wmputdians required for dividends
United Sbtw to the &tent the
Co

'

-

1887 mrrurnulaled profits and post-1886
~lndisuibutedcmm*
are non-subpert P

No. 4 I Tuesday, January 1.
-

-

LZvd

limltatiw earnings
and pmfnr
section m(d)Il)[I). hsotDecernber31,1982, hmmchfirst-tiwandlom~tier
and profirs on which the
-mm' paid am treated undei d o n
Co~potationA bas ~ r of
npost-jg86
mrpomtion+i) Rule. I f i n e taxable
United Statas-sourceM g s ~d
undistributed earnin~send $40 of post-1year dividends are received by a
.... foreign income taxes. For its 1986 taxable
domestic shmholdm or an up
profits. -on
f .-(m)(6&
,,,
~mporntionA h n ~ m u h t c pmfin
d
OOrpomtion hmhro or
included in g m s fn-n
~ d a dr m
of 2(net of f0miflntaxes) and paid a
78 shall be mtd for puof .. , - '*- :
mrporations or two or more lower-trar
Of fore@
mas
In mrpara~ons,the fornip how tax=
&ion g~ M income in -parated
1 0 9 ~Corporalion
.
A distributes 1!ihl to
category to the extent &a1 t
h fareign -*
dmmed paid by the
~ r p o n ~ i oM.narporation A has I O O o~f
'
6hareholder
o
r
the
~
P
P
~
~
?
Incoma
~
~
taxm
w
e
e
alltmited
andpost-1 gw undistributed earnings snd the
d i " ~ -fa,
,
is ~ r t m
d
r
ml d
mrpontion under d o n s M 2 (.)md
apwnimad ta incola in that rspani - '
mtegory. See -ion
F#l4(d)(3)(G)a ~ d ,:
fi]nnd paregrnpb Ib)of this d o n
post-188su n d i ~ i W
earnings to the
extent of lm.
Tbe h
t IOOu dim&L
be romputwd separately with
. 5 1.-](31.
from post-1986 undisbibutd sarolngs.d.
(ill Fore@ income tares deemed p d d
t to rbe d i d e n d s m i v e d fmn
.
because the distribution E ~ ~ U tS b~ 0S ~
by on u p p r - t k clupcmtioil. F o n I p
s l ~ t . t i co
~ r omtion or IowBP(L~
e a r n l ~ s -lation
,
is
to have
mrporation. If a omestic shareholder
income taxes deemed p l d by an .
paid the entire amount of post-1986 f ~ @ rmceiv~sdividend distributions from
uppertier corporation on a distribution
rution A (S40L The
intaxes of
b m a lowertier corpratioo are not
one or more first-tier corporations and
remaining Y)u divi end is eeated as a
included in tbe earnings and profit8 of
in the same'taxable year the first-tier
out of lees eccumulatcd profib
mrporation receives dividends born one the upper-tier eorporatian, For purposes
under parappb fi)C!) of this section.
of ion 904, fornip inoome
at more lower-tier corporatjons. hen
Corporation M is deemed to have paid315
shall be ailrrcated and npporti~nedto
( ~ x s u u / ~ [ Kbnslated
~u,
at aha appropriate the amount of foreign income tmes
exchange rates) of Corpwetion A's forsign
incoma in u separate btegory to the
d ~ r n e dpaid 6h8it be computed by
,. ,
income taxes for 1986. As orianuar~1.1993, etefiing wilh h e lowest-tier corporation extent those laxes were all-led
to the .Corporation A's post-1986 undrstribuid
and worhg
upward.
earnings and proFits ol the Iowat-tim foreignincornetaxes
earnings and
(ji) Exom le The following example
curpoml.ian in that sepame ategay. , !
are 0. Corporntion A has 1SOU of
illustrates
.pplication of this
See section W4Id)(3)[G) and 5 1.904accumulated profits and 4Su of f o ~ i g n
6@)(3). TOthe ewlent that sectian ~ ( g )
paragraph [c)(l):
tamis mnainm in 1986.
~xarnplc2. DPmestic corporation M
fiomplc. P,a domatic corporation, owns treats the sarnings ofh a lowertier
corporation on which those fmign
40 percent of the voting stock of foreign
(incorporated on jaauary 1, 1987) o m IM)
income taxes wem aid as United Statas
permat o l foreign corporation A
corporation S. S owns 30 psrwnt oftha
(incorporated on January 1 , 1987). Both
voting #lock of toreign carpomtion-T.and 30 mum earnings an
mfits, tbe foreign
&rporationMandCorporationA~~the
pemntofthevoringfitddhign
bxes doarnApaid by the up*
calendar year as the taxeble.ysar, und
cotpw~tionU. Neither S, T.o & b
~ a
tler corporation on the distributipn born
G w r a t i o n A uses tbe u as its functional
controHed loreign corporation. P, S. T end U helower-tier
s b l l be
currency. Assume that l u equals 51 at all
all ute !he cslendar year as their texrble year, tmated attributebls to United States
relevant times. Corpnlion A has 30 pmln 1 ~ 9 3T
. and U both pay dividends b Sand
and pmnls. See
1987 actumulsted profits. All of Corporation S pep n dlvidend to P. T o compute fomm
and 5 l.We-SIm}l6).
A'S posl.1986 undiskibuted earnings om
tsxes deemed paid. paragraph IcUt) of thia
non-subparlFgenerellimitati~nearni~p s e c t i o n r e g u ~ s P t o s ~ w i t h L h ~ I o - t i a
~~0~p~?.Tbefo~~owing8xam
a l u m t a t h e ~ 1 -of this m
h
&d prnfits under section 8wId)(l)(l).On
corporations end to -puts
foreign t u a
january 1,1992,Corporation A has A deficit
desmed paid a e p a i e l y lor dividends h r o
(c)(Z);
wch first-tier and lowsr-tier corporation.
accumulaied earnings and profils end a
hnmple. P,Idombalc
rntion, ownm deficil in past-1986 u~distributede - 1 ~ of Thus, S hrst will mm ute fweign tsxw
>DO prcent
millga
SEf ,,rid
[~mu].
No foreign taxer hsre been paid with dmrned paid wpantary on fb dividends
bni mrpmlim S,
Pmd 8
,pal
10 pat-lW6 undis~ibutsdm i n e .
born T md il. The deemed paid tun will
)w
tbrC UbIe
During 1992, Cnrporslian A earns lm (net
be added lo S's post-1986 foreign income
,,d
theu as itt
bdwsi
nursw..
.
of foreign taxes), pays S4O offoreign h e r on
taxes, end the dividends will be added to S'n , AMthat squ& st a 111
thwe earnings and distributes 50u to
~st-lBM
undisbibuted aarnfws. Nuxt, P me. ofjanuary
,992, s bm +pmt- ,
h r ~ r a t i o nM.As olthe end of 1992,
will compute fonifn taxes dnmwd paid with f a 6 ~ ~ d ~ b , , t d ud +
'
lo the divi end hm S. Thig .
Corporation A has a deficit ofI100u)11200ul rcs1986 f o r e b h m n e tax-. In 1w2,S samu
mmputation will take into account the taxp~f1986
undis@ibut6$eamin~6+ lODu
150u or nmmbpmFgeneral l i m l l a h
paid by T and U snd deemed paid by S.
current earnings and pmfits) in p l - 1 9 B 6
income nd of fomign taxes and pap 61hr d
undistribu~edearnings. G r p ~ t h A.
n
b m i p III(IM~B
tw-. Aa of he mud d IWZ, (2)
78
Foreign
however, has current earnings and profib or
but befom dlvidtnd pe-nb,
S bm 3of
income taxes deemed paid by a
1 0 0 ~Therelore,
.
the SOU distribution h
pmt-1886 undi&buted samings md
oC .- - ,
domesiic
shmh~/deramp
8s
*led
as a dividend in its entirety under
- @-1986 foreign inwm loxw. A m m s tbrt
provided in s d o n 960filand the
.
o d i o n 3 16(a)(2). Under paragraph (b)(4) of
Wu of S'r m w ta I 892 m born Uniw
this d o n , -ration
M i s not d m m d to wdetions under that d o n (mbting
Status
S pap P adiridend of f ~ u- ,

~ ~ - 5 .

g!:",

T

"$

&

S

,=

,
,

.

e-

won

-

- .
I .

A

.--

federal R e t r I Y O ~62,
. No.

.

/ Tuesday, January 7 , 1997 / Rules and Regulations

(zooutWIl1 ofpsti19b6 foreign income
w.hparagrapha (aHBni) ond (bl[l) or

dimhtim t~ CpapMetioa A) and p y s 1OOu
of h i g n
taxer that i r q u a 1 t o Jl00.
Rurum! to p o m p p h (4)(13Ui) o f t h i s
mction,-on
Bb port-1986
undishibutedamhp and post.1986 fpnign
Ipc.amt b m wiH include earnings p n d
profits and b b n in-e
h z e s attributable
to Gqmaiion B'm s n t h i N 2 taxnble
md all h ~ b 7
k ~ b m R e r . Thur. Ihs
April 1,10g~.divi&ndlo Corporation A will
asdurn pwt-1986 undistributed earnings lo
300u (5OOotZUDu) under m p h lal(9)(i)
dais e n . The k i g a income t a * ~ s
+tbibutable to the amount distributed as a
dividend to Corparation h will nM be
rreditabls beuw arpontion A is not a
hrnestlc shareholder. Pwr.1986 fw*
i n h e taxes, however, will be reduced by
Ibe m a l of kip taxes stbjbubb)~to the
dividend. Thus. ms of the b i n n i n g of1993,
Gutporntion B bas fa ( ~ 1 ~ S 1 0 0 x 4 P %

'

4

931

amount of the dividend out o i post-1986

undistributed earnings [determined without regard Io the g m - u p under
Ib)Compulution of jomign income
section ?a] beam to the amount ofthe
toxes deemed paid by a domestic
distn'buf ing corporolion's pod-1986
shareholder. fimt-tier corpomlion, ond
undistributed earnings. A n uppr-tier
swond-tier corpomrion--l1) Ceneml
mrporation shell not be entitled to
rule. lf a foreign wrprat ion pays a
compute an amount of foreign taxes
dividend in any taxable year out of post- d e m e d paid on a dividend fmm a
1886 undistributed earnings to s
lower-tier corporation,however, unless
shamholder ihmt i s a dorntstic
shareholder or an nppr-iier corporation the ownership requirements d
paragraphs [a) (1) through (41 of lhis
at t b time
~ it receives rbe dividend. t
h m
i o n are met at each tier at the time
d p i e n t shall b deemed to haw p i d
the uppertier corporation receives tbs
the mme proponion ofm y p d - 1 9 8 6
dividend. Foreign income taXb6 deemed
foreign income taxes aid, a m e d or
paid by a domestic shareholder or an
d e e d paid by the &tributing
upper-tier corporation must be
corporation on or with respect to mtcomputed under the lollowing formula:
1
undistributed earnings wbi& the
this w ~ o n .

Dividend paid to domestic sham

holder [or upper-tier corporation) by
Frnelgn l a w n l e taxes deemed paid by
domestic sharebolder (or uppet-tier

mporatim~

- (2) Allocation rule for dividends
ott~21utoble
to pod-1986 undistributk

=

Post-tg86 fomign income taxes of
first-tier corporation [or lower-tier
corporation)

Dividends will be deemed to be paid

anzings andpre-1987 occurnuluted

firs! out ofpost-1 986 undistribu t t d
earnings to !he extent themof. If

profits+) Pottion of din'dend out of
psf-1986undishibiuled earnings.

dividends exceed post-1986
undistributtd earnings and dividends

Portion of ~ i v i d & dto s Shareholder Ateibumbls to Post-1986~ n istributed
d
=
F-Ings

[ii) Portion of dividend out of p*
I g87,accumulated @is. ~ f i 8 r - h
wrtion o.f h-a. divi end attribubbla to
&-1986 undistributed earnings is
determined uuder paregraph (bI(ZMi1 of
this aeccion, the remainder of the

J'

dividend ' m i v e d by a shareholder IS
attributable to pm1987 emumuleted

Dividends to
Po*-1986
Undistribuid
Earnings

x

profits to the extent themi. That part of

tbe d/vidend attributeble to pre-1087

eccumulated profits will be tmated as
paid first h m the most recently
accumulaled earnings and profits. See
5 I.IK)z-3. If dividends paid out of pre1987 accumulated profits are
.
ettributeble b mom than one pm3%8?

r

(31 Endends poid out of pm1987
occumuiated profils. If dividends am
paid by a ht-tier carporetion or a
lower-tier wrporation od of p e l 9 8 7
mmmulated p d t s , the domestic
rbmholder or upper-tier corporation
that w i v e s h e dividends shall

. J a e m e d to have paid fomign income
~IXW
to the extent pruvided under
- d o n 902 B D the
~ regulations
'

first-tier corpo,mtion (or lower-tier
corporatian)
Post-1986 uadislributd earnings of
first-tier corporation (or lower-tier
corporatian)

are paid lo more than one shareholder,
than the dividend to each shareholder
shall be deemed to be paid pro tala out
ofpost-1986 undistributed earnings,
computed as follom:

(Dividend Paid Out ofb-1887AcPoRion of Dividend to a Shambolder
cumubted Pm61s with Res
Attributable to AmumuIntsd Profils of =
the PartimIar he-1987 Taxa e Year
a ParlicuIar I'm-1 987 Taxable Yeat

-

x

Shareholder
Total Dividends Paid To all

Shareholders

taxable year and are paid to mom than
one shareholder. lhen the dividend to
each shareholder ettributeble to
earnings and profils accumulated in a
particular pte-1987 taxable year shall b

deemed to be paid pm rate out of

accumulated profits of that t w b l a year,
computed as followo:

Dividend to Shambolder
Total Dividends Paid to all Share-

holders

themunder as in e l l e a prior to the
is tmated as a dividend &deJ section
eflmtive date of the Tax Reform A a of
316(a)(2), and post-1986 foreign income
1986. See paregraphs (a) I101and (131 of taxes s h d not k mduced, if os of ibe
this section and 55 1 . 8 0 2 3 and 1.902end of t b e iaxeble ylw in which the
4.
dividend is paid or m a d , the
corporation has mrn or n deficit in post[4) Lkficib in omumulakd earnihgs
1986 undistributed earnings and the
ond profirs. No foreign income texas
sum of current plus accumulated
shall be deemed paid w i t h respect to a
distribution from e foreign corporalion
earnings and profib i s a m or less ihan
out of current earning6 and profits h a t . m.The dividend shnii reduce porn-

*

830

Federal Register I Vol. 62, No. 4 / Tuesday, January 7 , 1997 f Rules ahd Regulations

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published in 1-2-1 CB.1 1 ~ ; & ;r. :
or $293. l i a deficil in p t - 1 9 8 6
undistributed earnings is camed b&to §601.60lIdll2)lii~lb]of this chapbr). .
offsd pre-1987 enrumuiated profits,p m
(12) Dividend e e i v e d . h dindad , f S87 ammulaled profits of a particular s b d l be c a n s i d e d m i v e d for - , - ,
PurpOges o f s d o n 802 when the d ,
= .
)a*ebIa year shall be reduced by the .
or other pmpeny i s unqualiEeQ
amounl of the deficit
bad to
to the demands ol tee .. .,
- -.. .
that year. Ses 5 1.902-2. The smoun~of sub*
d i s t r i b u l e e . S e e S l ~ l - l ( b .~:~. Y ,
s disiribution out alp-1987
riier corporetion.
accumulated profits, and tbe amount of - dividend rlw is w m i d . dm d v d
~pecialollocotion~.
me irm
. p u r m of redion 902 when It
foreign income taxes deemed prid
k. - ....
post-1986undisCributed earnings m m s under section 902, s ~ be
U determind dwmed -had under W o n Jw, 1- :*,-, .. .
the iota] amount afthe earnings of the
and -slated inlo United States dohm 367Ib). 5sl. rn 1248corpa~tiondetermined at the corporate by
(13) Sp"ial cffecfi& cfk&i) ~ u k . the law as in effect prior to
level. Special a l ~ ~ t of~earnings
n s
the ~ffectjvedate of the Tax Reform Ad
f%
onwhicb he'0wne4hip 'end tax- to p a r t i c ~ ~ ~ i dof~1086.
. ~ e $5
quiremmts of =€ion w2Ic)13)@] md .
e t.aoz-9.1.aoz-r aad
whether required m pemjrred by
1.-3.
.
.
~ p p h b s) ( l ) h u g b(4)ofthiP 4 . - .
foreign law or a shareholder agreement,.
p i j ) fomjgn
income
& b u ~ b -ion,met with ieaged to a
sha 11 be disregarded. If, however, the
.
c
~
p
m
t
i
m
without
,
ward to w
e .,
1987 accrrmrr]dedp m , t g . ~b
Commissioner establishes that there is
B dividend Is distributd. h D
I 1
[empm1987 fornip incoma
on agreement to pay dividends only out
ymr of the foreign
forefgninma tax& paid,
,
.
of earnings in the -parate categori- for emed, ordeemed paid by a foreiga
k w after~
passive or high withholding tax inlamst oorporatian on Dr
respedto its pm tben,
,
income, then only tares imposed
(A1 The past-1986 m&&td
" ,. .
la7Bocumubted
profits. pns1g87
pessive or high withholding tax interest fornip inwrns
tewwofa
yesr eamings and pea-1886 foreip boom .
earnings shall be treeled 8s related lo
she]] be redu& by
amount oftaxes taxes of the fomi mrpmtion shall bs
tL dividend. See § 1.9046(8)I2).
tUIable )"DMb &g into eccount mly
ddemioed
paid or deemed paid by ths fornip
(10)-1
987 mcumulated pmfits4il mTora tion oo orwith nspect to
on and aAer h a
&finition. Tbe t a m p - 1 ~ 8 7
h day of the find taxable
of the
amount
distributed
or olhemise
accumulated profits means the m o u n t
f " ~ I g " C O V ~ ~ (O
nn
~ ~$%
included in
hm prP1987
ofthe earnings and profits ofa foreign
amm*
.
accumulated profits of that year. Thus, Ow"eai~ yuirements
mlian computed in accordam pm1987 fOmignjncoms luar
indudhg rubquent taxahla ~ s vin,
l
shall
~~~0~
902
a l ~ i b 10u its~
=duud by
of
d e e d which ibs a m h i p m q u b m a n ~of ',
[axable years beginning before Jmua
shmholdn
d o n W2(c)I3)Bl a d parappbs
p ~ byd
1, ,987. If h e special effective dale
(e)(l)tbrougb [r)of this section ma apat
shambolder
p m g n p h (.)(I31 of this section epplin. (ngard'ar of
chose
to
uedit
foreign
inmrne
taxed
met;
and '
pm-f 987 accumulated profits also
@) Emhgand profits m u l a t d
undsr section 901 for the year of B e
includes any earnings and profits
Pdor lo Rnt d.l
distribution or inclusion) or Ifirst-Uu
lsomputed in accordance uih Mi,,,.,s
the fornip
c o ~ m t i ~h
inwu*
yw
or
second-tier
mrpomtion.
end
by
the
964(a) and 9861 attributable to the
t b e ~ ~ e mqfdim~ m 9 n b dsectiad_." .
amount of taxes Lbat would have been
foreign corporation's taxable years
deemed pa jd had any other sbamholdsr Q02(c)(3)lB1and
W(1) beginning after December 31,1086. but
h u g b (4) ofthis d o n 9 met &all
been eligibl~to compute an mount of
befors the fim day of h e first taxable
pm1B87 ~
~
~
t
foreiwmrporaliDn in which foreign tares deemed paid under swtim
. .
rur
mquirrmentl
of &ion
902. Foreip h o m e taxes deernedpid p?Frtr
hemenhip
(11) Gxam le. The following e m p k with respect to a distribution of pre902(c)(3)(B) and paragmphs IaI(11
illustretts
e a w a l effective date
1987accumu1ated profits
through 14) oflhis section are met with
d
"
of
&Idr
m
p h
translated from Lhe functional currency
respect to that cqoration.
Erumpie.
Al
o
f
b
a d k 31,lWl. 4
of
the
distributing
corporation
into
( ~ i )Computation of pe-1987
rinrz I t s I n ~ t l mh
.p
i wqmmtJW A.
United States dollars at the spot
occurnulated profits- Pm-1987
bar owned IWpemenl of tbe lto3 of hdp
~
c
h
m
g
rate
e
in
effm
04
h
e
date
oftbe
crccumulated profik must be computed
B.
Bicmdm
distribution.
under United States principles
m n ~ l l hd e t r o t l W t l m .
governing the computation of earnings
(11) Din'dend. For purposes ofd o n usw the m l e o d P r ~ it, u b l e m,&
902, the definition of the tenn dividend its hetloapl cumncy b ths u. ~srummlu
and profits. Prs.1987accumulated
in section 316 and the plati ions under quala S1 mt .I1 relevant b w . On Apd11,
Tofitsam delemined at the corporete
,.
that section applias. Thus, for exemple, IQgz.Coipontlw B pays r 2 w u divideud b
Lvel. Special .I loutions of
o-edp
distributions and deemed distributions CO~pomfionA
eccumulated profits and taxes to
requhments of d o n 902[c#3#81 lad
.
under m o m 302,3W. 3 0 5 b ) and
p d m l m shamholders with respect to
m ndp h (a)[ll tlm@
dislributions ofpre-1987 sccumuleted
367(b)that am treated as dividends
tims, (4) d h l a d m
,ubI, IsOZ,.
,
within the maaning o l d o n 30'l(c)(1) dommuccwpomrinn
profib in taxable years beginning after
mt
Derarnber 31,1986, whether requimd or also are dividends for purposes of
o f t b ~ o ~ t i o . ~ * ~ C o l . ~
sedion 802. In addition, the term
permitted by foreign law or a
Amd,forthebiW,~arpmahonB~
dividend includes dwmed dividends .
the omemhip raquhmsnts d don
. . -:
shareholder agreement, shall be
"2(")(31(B) urd w p b 1aM2)dthb.
under sections 551 and 1248, but not
disregarded.Pre-1987accumulated
s d o n . -tion
M uatrs Lhr wlsodu par
deemed inclusions under s e e t i b
pmFib of a padicular year shall be
ag Its m b l e year.
p m i i o n B dtm
O S I l s ) and 1283. For d e s conaaming . di,abute
l.ldeb rndS
m d u d by amounts distributed b m
those
profits or othsnvise
excess distributions fmm d o n 1291
during 1w2.
itr tsxabk
. ;. .
funds that are
as dividends
included in income from thm
hmxnbar 31, lmz. ~
t
i 8 bu
w #xk ,.
tp u m ,
scculnulated profits. for example under solely fw forsign tax d
of m i w and pmfib
ww-.(see Rqulation Pro* INIlr6-7
sections 304,3671b1,55'1.851(a), 1248
hfmbkiq into w u n t th 2 m .:,: .. .
pursuant to section 90*(d)I2)IE)(ii)and
is not included in posl-1886 fomign
i n c o w taxes under paragraph la)tB)liii)
of thir section. Enrnings and profits of
an upper-tiercorporation, however,
shell not be reduced by foreign income
taxes paid by a lower-tier corporation
and dmrned to have been paid by the

'

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A

i'

-

,-

,-

,'

'

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.-

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-

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me ex tent the foreign taxeswere nnt

Post-1986 foreign income taxes shall
include foreign income taxes that are
deemed paid by an upper-tier
corporation with respect to distributions
kom a lower-tier corporation out of
distributed to, or otherwise h c l u d c d
(e.g..undersections304.367(b),551, nonpreviouslytaxedpre-1387
accumulated profits, as defined in
951(a). 1248 or 1293) in the income of,
paragraph (4(10) of t h i s section. that are
a foreign or doruest ic shareholder.
received by an upper-tier corporation in
Except as provided in paragraph (bJ(4)
any taxable year of the upper-uer
of this section. foreign taxes paid or
after December
deemed paid by the foreign corporation corporation beginon or with resped to earnings that were 31+1986, provided the upper-tier
corporation'searnings and profits in
distributed or otherwise removed frmn
that year are included In its post- 1 986
post-1986 undistributed earnings h
undistributed earnings under paragraph
prior post-1986 taxable years shall be
from post-1986 foreign income (a)@) of this section.Foreign inmme
ta~es
deemed paid with respect to a
taxes mgardless ofwhether the
distribution of pre-1987accumulated
shareholder is eligible to compute an
profitsshall be translated from the
amount of foreign taxes deemed paid
functional currency of the Iower-tier
under section 902,and regardless of
whether the sharehnlder in fact chase to corpo~i~lion dollars at the spot
excfiarlge rate in effea on thc date of the
credit foreign income taxes under
distribution. To determine the character
section 901 for tfie year of the
of
the caws and profits and
distribution or inclusion. Thus,if w
associated taxes for foreign tax credit
amount is distr~hutedor deemed
wtrjbuted by a foreign corpomtfon to a b i t a t i o n purposes. see section 904 and
3 1.904-?(a).
United States person that LS not a
(iii)Fore@ income taxes paid or
domestic shareholder within the
acrrrred dtb respect to high
meaning of paragraph [a)(I) 01rhis
withholding tax jntwest. Post-1986
section (e.g., an individual or a
covoration that o w less than 10% of Ibreign income taxes shall not include
~ O E ~ P b c o m 1 ~ pdd
ac~ued
by
heforrip eorpcntlonrs
a
noncontrolled
section
902
corporation
ar to a foreign person that does not meet
thedefihitionofa first- or second-tler
defmPd section 904(d)(2) (1))
under parapa+ la)(2) (3 w i h respect lo high withhlding tax
of tl+is section. then although no foreign Interest (asdefined In section
904(d)(2)(3)) to the extent the foreign
income iaxes shall be deemed paid
tax rate imposed on such interest
under section 902.foreign income taxes exceedf
See
atuibutable to the distribution or
904 (d)(2)(E) (ii) and S 1.904-4 (g) (2) .
deemed disVibution that woWd have
T h e reduction in f ~ j Income
p
taxu
shreholder
deemed mdhad
pdd or x-ed
by
the
mount of tax in
met the ownership requirements of

paid or deemed paid by f i e foreign
corporation on or with respect to
earnings that in prior taxable yean were

vow

'f

this

foreign income taxes. Further. if a
sharehlder choosesto
foreign taxes paid or accrued for the
taxable year of the distribution or
inclusion. it shall nonetheless be
to have paid a p r V r u o n a e
3 hare of Che foreign corporation'spost1986 foreign income taxes undw section
902(a), and the foreign laxes
paid must be remwed frum postL1 986
of a
foreign income taxes- In the
foreign corporation the forei@ jncome
taxes of which am determined based on

an accounting period or less b a n One
year, the term year means thal
accounting period. See sectiom
44 1@)(3)and 443.
(ji] Dh&iburions our of earnings and
pmfics accumula red by a lower-tier
coporatson in its taxable years
&g~ni~~bef~re]~~~a~
included in the gross income ofan
upper-tiercorporation In f ts taxable
year bgrnnfng A r D e c e m b ~
31. 1986.

crltpratim's subpart F income. as

defined insection 952. attributable to a
shareholder chat is not a United States
shareholder wjwn Ihe meof
section 051@) o r section 953 (c) (1)(A).
be-use that amount has no1 been
included ha shareholder's
income. Post- 1986 undistributed
e-ngs

shall be redut-ed as provided

herein regardless ofwhet her any
shareholder is deemed to haye paid any
foreign taxes, and regardless d whether

any domestic shareholder chose to
claim a foreign tax &edit under section
901(a) for the year of the distribution.
For rules on carrybacks and
carryfarwards of def~cltsand their effect
on post-1986 undistributed earnings. see
5 1.902-2.In the case of a foreign
corporation the foreign income tax- of

which are computed based on an
accounting pedod of less than one year,
the tern year meam that accounting
period See sections 441(b)(3) and 443.
(ii) Dfstribution~
out o f earnings and
pmflcs accurndattd by a lower-rler

cotporatior~In its s a b l e years
beginning b e f m January 2 , 1987, and
Included In the gmss Income of an
upprn-der corporarlon in iis taxable
year beginning afrer December 31, 1386.
Djrmibutionr by a 1ou.r-tier corparrion
out of non-previously uxed pe-1987
accumulated profits, 4 defined in
~ ~ E d ; s ~ , " t & ~ ~ ~ , " , " e ~ t p m p p h 0(10) of this section. th.t r e
computed in functional currency before received by an upper-tier copration in
foreign income taxes are translated into any taxable year af the upper-lier
U.S. dollars and htluded in post-1986
corporation beginning after December
31, 1986, shall be treated as pest-1986
foreign incometaxes.
(9) Post-1 986 undisrdbuted
undistributed earnings of the upper-tier
eamhg+(i) Jn general. Except as
corporatlon, provided the upper-tier
provided in paragraphs (a) (10)and (13) corporatio~~'s
earnings and pmnfi&for
sectlo*, h e term post-1986
of
that year are included Ln its post-1986
un&trlbuted earnings meam a e
undistributed eardngs under paragraph
amount of the earnings and profits ofa
(a)(9) (i) of this section. To deternine the
foreign colyorat ion (cnrnputed in
character nf the earnings and profits and
accordaoce with sections 964(a) and
associated taxes for foreign tax credit
9%) accumulated in taxable years of the limitation purposes, see seaion 904 and
foreign corporation beginning after
5 1.904-7(a).
December 31. 1986, determined as of the
(iii) Reduction fbr foreign income
close of the taxable year of the foreign
taxes pafd or accrued. In computing
corporation in which it distributes a
post-1986 undistributed earnings,
dividend. Post-1986 undistributed
earnings and profits shall be reduced by
earnings shdl not be reduced by reason foreign hcome taxes paid or accrued
of any earnings distributed or otherwise regardless ofwhether the taxes are
included in income, for example under creditable. Thus. earnings and profits
1secrion304.367(b).551.951(aJ.l248or
,1987,~d
shallbereducedbyforeignin~~me
1293, during the taxable year. Post-1986 taxes paid with respect to bigh
undistributed earnings shall be reduced wlthholdlq tax Lnteresr even *ugh a
portion o f the taxes is not creditable
to account for disulbutions or deemed

(u

pamgnpb (a)(1
sect'on lhd be

djstributions that reduced earnings and
profits and inciusiur~that t-esultwhi
previously-taxed amounts described in
section 959(c) (1) and (2) or section
1293(c) in prior taxable years beginning
after December 3 1, 1986. Thu, post1986 undistributed earnings shall not be
reduced tu the extent of h e ratable
share of a controlled foreign

928

Feder.1 Register / Val. 62. No. 4 / Tuesday. January 7 , 1997 1 Rules and R ~ ~ & U -

1

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5 1.WZ-I RUIH fmd i S & i ~ ~ n r
( I ) Third-tiercorpomtion. In the cem
=m-butuble to accumulated pmfiis/br
of dividends paid to a m u d - t i e r
e~
tuaoble p r s in which f ~ f i u corp~r~Cion
mrporation by a fornip mrppntion I$
wos a less developed cocrn* corpamtion.
-bls
year b e g a b d a F
-&
(el In g e ~ t a l .
31,1986, a foreign wrpomtioa is a
fi]Combined disbibutions.
&id-lier mrporalion if, at the time a
( 6 ) Distributiom

of 1 b!+ier

~

t

i

m semnd-tisr oorgoration

attributable lo ~ Udimibutiona
D
frwa
second- or third-tier m r p o m ~ .
Id) Illustratlcm*

.

$1.102-1 Clbdlt for dOllMO*
rhsrohd* of -f
m l g n I n e m w pdd by Wm

-a=

[a)

Definitions and s p " d

*

WW

dote. For purposes d d o n Bm. thh
= d o n , end 5 l.v2-2,the definitionm

mvided in paregmphs (a) (11 through

PI^) of this m i o n and the spadd

. W i v e data of paragraph IaI(13) ofthi.
section apply.
(1) Domestic shareholder. In the mse
of dividends received by a domestic
fr~m
a foreip carpOm~on
&er Demmbe~331.1986, tb term
domestic shareholder means r domegtic
corporation, other tban an S w a n
BS defined in section 1361(d k t
sf leas 10 percent oftbe d
g ~ o c of
k
rote@ rnrp-tion
at the time the
domestic c o r p o d o n receives a
dividend from tbat foreign mrpomtion.
[2) FiM-tier corporation. In the case of
dividends m i v e d by a domestic
shareholder from a foreign corporation
in a taxable y e w beginning after
boember y1.1988, the term fim-tier
corporation means a fomign
c o v n b o n . at least l o pmnt
of
wring mock of which i s owned by r
domestic shareholder at
time
domestic shareholder w i v e s a
dividend from h a t foreign mrpomtion.
The term first-tier corporation nlso
includes a DISC or fomet DISC, but
only with mped 10 dividends from the
DISC or former DlSC that
under sections 861(al(2l(Dl and
862(8)(2) as income fmm SO-s
without the United States.
(3)Second-tier corpomtion. In the
a= of dividends paid to a first-tier
corporation by B foreign corporation h
a taxable year beginning sflet December
3 1,1986, h e foreign corporation i~
a
m n d - t i e r corporation if, el the time e
LEI-tier corporation receives a dividend
fmrnthetforeignmrpomtion,theS~ttier corporation awns at least 10 percant
of the foreign corporation's voting $
I
d
of the following equals
and the

wrn

a l least 5 prcenl-

*&

(i) The pemnWe0f voting
owned by tho domestic sbnrsholder in
the first-tier corporation;multipfid by
(ii] The pemnlage of v o t i stock
~
owned by the first-tiercorporetim in
Ihe m n d - t i e r mrporetion.

from
Ialgign mrpo*trm,
ibe m n d - t i e r eotpwatioo owns at lesd
10 percent 01the lornip corpmtioa'm
wthg stock and the produd of the
FoItowing squals at least 5 p m n t (i)Tbe p m t a g of votm d d
m ~ e by
a h doakS ~ ~ ~ D I Ci.I V
tbs fid-tier corgrration; haultiplied by
oil T b e paroentage of v o w stock
owned by Lhe hsl-tier carpation in - tbe m n d - t i e r wrp~mrporatioo;multiplied
byfiii) Tberbp
Of v d m i dodr
owned by e second-tiercorpwation

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m r p m t t o o B on JanuaryI, 1PBl.md

,,ti,,,
to

.--

. .,..AT, & ~ .- -:. 2-.:
.:
mrporntions.~the- olathlrd-aisi. T
corporatian, tbe tenn u p p 4 e r 1.. -. .mrporation m m m a hor ~wxuld-. - ,
corporation. h the mm of r semnd-tig .
cwporalion, theterm upper-Msr
,
. .
corporation means a
corporetlon. In the rgse of a W-tim wqwraticm, the term -01
coporstion means n aeoond- or rhW- >- tier corpration. In thq
01a secoad-(61 Uppar-m d k

the third-tier
( 5 ) Example.
e foilowing example
illusk~~tes
tb. ownership requirements
of p m p p b s (a1 (1) through [4) of thir
don:
he.
Ii) ~omesticcorporalion M mrm
% ~ r c t n04th
t
s t d of h i
m v t i o n A m J a a 1.lm.m for dl
&dg
tbemftet*-ntiofi
A
10
p m n t of the voting ridof faralgn

tj8r corporati*, B s term bwnE4i.m. ::
mrporatiwmeans~thkd-tier.:,, ..
. -:-. .
atporetion. . ..
.... . .
(7) Foreign income taxes. The &im . .
foreign income tsxes means
wu
profits. and s x c m pmfitstams rr . .
defined in 5 l.mi-2Ia1, and tnxaa . :
included i n t h e t s r m i n ~ m ~ .- ~
profits, and exprofits taxes by
.
r e a m of & d o n803, that a m m
Im
country or a -ion
of
kheaUnit States, inclu*
by
any oueh

1~91,
-1im
A
1~ fid
Corpwatfon B.Both
T ca en&
~
Oyear
A u
O tbm
Corporation B u a ths
taxable year. Gorpastion B ys a dividead
out
p o . 1 - 3u ~ ~n d i ~ ~ ~
Corporation A. whlch Corporation A tecaives
on February 16.1991. Corpcwstioa A ys rn
dMasnd
. f i b polrsw

mdi*cted
-*,
mrporatian
M,
~ r p o r a t i o nM
M.
to

'

'

'

mceiws on J a n u q
1892.
Grporation M uses a 6-l p t ending on
June30 as the taxable year.
Iiil On February 18.1sB1, wbon
u w d e e m e d p i d b y e ioreim .
G'porafion 0 Pays a dividend to w G m corporation under this d o n F a d g n
A, aV"B'i0nM wtiqfiar the 10 Pemnt

fon3=

:

inmme, war profits, and e x c w @to
taxes shall not include amwatr excluded h m the dshitiw of tbw - ' .
taxes p w u ~ nto
! d o n 901 and the
mgulations undsr that sactioo. See.*
.
paragraphs IcMlI and IS1 of this d m .
(concerning tornip hxm paid with
respect to fomigu mharal i m m e und in
'

pea^",
Corporation A. Therebn,~ q m a t i m
A n
IS

first-tiercorporation within tbe meaning of
paragraph (a)(2) of thb &ion md
G n p r s t i o n hi Is a domestic tharehdda d
Corporatlm h within the meanlug d
paf8~ra~
01(1)
h
oftbin
m '
n
Fmsr). 'Q91-C o ~ ~ t i f)o h8-dwithin Ihemp.n*of
w p h (a)(3) OF this section b u r s
Gvratlon
A owns at
-nt
of im

,

>

~ a n e c t l o nwith tbe purcb-

ar

-'

.

d m of

oil snd gaal.
. .
(8) P&-lsB6fomign hmmc tax.
- . ,
.
vodng
md
PBTCllDt4pB OfYOtiPg
Iil h gemmi.k p t as proTidal3rr
.
,tdowm~by~o~retion~in
parepph6 (s)tlO)and Ilal of9 ::- Corpomtion A on February 16,1wi.(30
d o n ,h
h
t
a term p&t-1886 romp- '.
percent) multiplied by b e pernetage ofinwme taxas of a foreign cqmmicm .
votingrtod owned by C o v u o n A h
means the sum of tlm foreign h m n a
Corporalloo 3 on February 16.lBg1{10
taxes paid, m e , or deamd paid Iri' ; .
. the m b l e year d rbs B m i p .-:-. .- ;
petmot) equals 12 percent. Cwporatiw A
be dRd to havepid Ioreip ioewls oorporbtion in whI& It distributG'r .
taxes of
with mspecl to tbs
dividend plus the foreign incorns ta*ar
dividend-ived hrn
on
'

'-

'

P ~ J I I&,
U ~IN].
[iii) On J a n u q 20, IWZ, Corponth' M
mtisfisr the lbperwnt rtoct, wenhip

P"

d,aocntedorhmedpidfntba
otaign mtporation's prior -ley-.
beginning after h m b e r 31,1988, IP,.

-+.

'-

-

,

..

-

F d d Register I Val. 62, No. I
-

I

?'uesaay, January ,,

I W ~ ,

,

..",

+ru,ma

".....,-....-,....... ......

--

~ ( v i d m d apaid out d po.l-18~6
undisvibud ssmlnga of Oxpmtlcm A to Corpmtion M In t 993
,
~
~
~
o
tuadiefdxtkd
~
. runingt
1
~ of CrrpDrallw
6
A p i d to -lion
M irr 1893
7 divided by Lina 5)
dsad p i d by Cqomtrm M in 1993 I L h 6 RNIF-2 Ln-e
hxes p i d nnd dmd r i d by
A thal
tipli by Uns
~:PaFt.reb~undbhibutd mruingr lo Gwpmlian A rl #tart of lm fWue 5 mlatu Wns 7)
I. M . 1 9 $ 6 fore@ b m m e tarw in -lion
A at Itan of lBM (Uno6 minus b b @I

..,.,,..,

.........,......... ,.-

-

1Wu

-

50%

......
,.,.-.....-.*...- .........

$125

S12L
t

e

,lSrumpis 5, (l)Sincs 1W7,dunestic & m a t h M bm owned 100 -nt
of the v o t i q slack of mtmlld foreign wrpontion
M d m unaducta oprntions through r fcueii bmnch. Both C o y t i a n A nmd rvrpDntion M uw. tha mlsndar mr
the bx&h p r . Corpomrion A
the u rn [tr h r n d i ~ n e lcurrency ma tu qurb Sf at st1 wlevonl ti-.
&rpomtjon A
M no rubperl P inmms, us defined In W o a 852, and no inmase in eornlnp invested In Unirsd SUM
p p r t y undor *tion
s for 1- *tion
A a h hes no pmviourly mxad imm saxlunts. &rpratim A haa general limimtion i n m t and high
.itbboldiw l a x inturwt I
th& by o p t i o n d redion 954@1(4). d m aol m n r t i t u l e brelgn bsa wmpany i n m e under m i o n
5 4 4 . WWSE
Corpwrth A u r wnnutlad f o r t i p wrpmtlon. 11 k nM q u h d b d u e s pst-1#6 h i g n income taw- b~
~rsip
turer paid or rccrud with rerped La hi@ withholding tax internst l o exoem of 5 percrrnt See 5 1.m-i[aMa)Cif). C g o r a t i o n
pys wu d i v i d e d 10G y t a o n M h 1-2. F a 1W2. Corpation M i s d e e d . under p n g n p h (bl of PIS .aim. to
p~jd
t ~ o
4
f the port-1986 om& bmmt ~ Bp i Id by bqmm~ionA mod include^ h t mount In ~ C I W in-e
vadw &ion
8 m r dividend. *ermined
aa follows:
m
d pmt-lgeB undistributed earninkg in Coqmmtirn A at dart of 1 W Z attributable bx
.
[a) W w rn(d)(~HB]
high withholding tar in-t
21k1
......
M
soJ[d)(l)Il) senme1 Ilmitetjm Inawn6
.
.
, ,
,
,
55u
!. m
d p ~ g t - l g Wfotwim Incorm taxes in h p m t i o , n A 41 slnfl of 1892 attrihtabls to.
(a)SBctiong~((d)(l#~~bi~hwl&bldingtuintsma
,
,
$5
W
SM(d){lHl) geneml limitel5on i n a m 8 ,
,
,----,.
..........................
$20
1. Assumed pre-ta* earnlrtga and protits ofCwparation A Br is92 ateibuteble to:
..............
- . ...................................... 20u
( 8 ) w o n gM[d)[t)(g] high withholding tax intenrst ,
M &&xt BM[dNl)Il]gcuersl tirnlletliw l m
2Qu
I. & ~ m e fofeigt~
d
i n a w e taxes p i d ar bccruad la I N 2 on or with respact tm
(a) Seaioa aM[dl(lnB) high withholding tax interwt
1011
.................................. 5u
W o n BOC(dl(1)(I) general limltetion inarms ...........................
.
,
i.Post-1886 undistributed eamlngs i n Caqmretioa A for 1Q92 @re-dividend)attributabie lo:
W . w o n m[d)[l)(B)
high withholding tax interest (Line r(aj + Line 3[aJ minus Line 4Ia)) ................................................ 30u
(bJ W o n ~ ( d ] ( l J l genetal
]
timitation income (Line l(bl •Line 3Ibl minus Une 4fiJ ."..
. 70u

. -tim

.

.

.................-.,., , , . . . .......
..,
.....................................
.....
.....................
- . .............
-.............................
.......,..... ...,,..-,.-..*.,....... ................................................ .
...........,... ......... ..............
.....
-...-.. ..............,-.....~........,......,...-....-,.~-,..-.....................................................
-...................... ...........................
....-......,..*.....................................................................
......................

-

-. .-..-..............................

......*................
....~.~~..~,......~.....~..-~~~~~.~~~...................................
.,. ............. IOOU
income msa in Corporation A far 1992 (pm-dividend) attributabk ~ o :
41. W o n 9M(d][lnB) bigb wrthl~oldingta*interest (Line 2 b 1 + tine
hnslaied mt the
.ropriate exthnage miss) ... $15
BM(d)(l#l) geneml limitation L n o ~ n e(Line 2@1 + Line 41b) translated st the appro&late exchange rates) .......... 521
(bl
7. Dividends paid to Corp-auon M in 1-2 .-.--.-..---,..................... - ..................................
. ..................... ,..............,.......... wu
s. Divideads paid 10 bqmmlion hd in 1992 etwibuiable trr sectjon m t d ) saperate d e g o r i e s
(c)Total ,
,
ti, R1Bf-19a ibmign

by-

((8)

unl ~t to 5j.gm-yd):
DMdemds picl loCmpontion M in XU92 atbiiutable lo -ion
RUY)Lo@)high w i t & k i g ul h w n t [Urn 7 multiplied bj Line Sla] divided by Line 5kjcJI.
fb) Divideads p l d to Cospodon M
1092 **buhbl= to wct1-n %(d)llUI) gtnaml limb iwr b m e {Line 7 multiplied by Line 5fil divided by Ejhe ~Ic)).
9. m h t a g e olCorpom~onA'r p 1 - l g 8 6 undistrtbuted e a r n i q e for l M 2 paid to Cwporation M dbutable to:
(a) S B a i a S I W ~ ~ ) ~ I hjgh
H B ) wILbboldiag tax iniemsl ILIse BIal divided by Unr 5Ia))
Ib)W o n ~ I d ) t i ) ( i )general l i r n i t a t l ~mmm* ILins 81bI dividad by Hoe 5(bM
.,.....
tion A d e e d paid by Corporetian M under section 802Ie) stt. bumble m
10:Forcip inarme lax- ofGo
i.) Famlgc~b m m turn 0E-b~ A d t e d p i d by
M under aectian (T -14 with
ta mo.
W(dn1X81 high witbbolding tax Intern tune 6(sImultlplid by Mac 9[a)).
&] Fonign i a c ~ t emxm of (brporetim A deemed paid by Cpqmatian M undw W o n 81 ( 8 ) with rsapsct to =tion
scHIdHrKO ~ n m Limitation
l
income [Urn 6Ib) muitiplied by Lhe 8(b)].
11, P&-1996 ~ d i s b i b u i dwrnlngs i n mrpqatioo A at rl.rlof 1993 attribubbls t o r
fa] ssctrw ~ I d l ( l l [ R high
)
withholding tax interest (Line 5la) mlnw Line 40))
@I SRtlm m(dl(1XI] genetal limitation t a m e ILhw bfil mio- tine %(blJ
12. Pw<+a~&
fornip im-e
tam m C
b ration A nt mtart of 3988 nllmbb to:
(a) -on
~ ~ l [ d l ( ~ XbEiibl rithholxg tax htt(Um6l.l mb1441............-......
.
81Section F ( d ) ( l X O pried Umihti~abmm6(bl mious h e lfl(%jJ ....
,

' IBU

12u

.
............... ........................................... a%
................... ...................................
M)%

.

-

<'

-

) .: 7 '
$
.-:

.

.-

.

--

.

'

.

.

.

-.

,

Iii1 F w garposa ofamputiw

*

$15

.......,.-..........
...,
.,....,.............
IZU
....................................................
........ 2 8
..--.. *
- -.-.......--.... ..---..
....-..-,.-..,.... .
.
....... 510

-

Cgl Efldvl! date. This d o n applies
lo any distribution made In snd ~ R e ar
fomign cwporeti~n'afirst U b I e y m
wid b~-hvti~n
lilb
beginning on or aLmr JanuaryI, 1987.
b lnmme in sepmte htegorlm will bs
rddd I* the fwlaigh inaome b e s paid or
5 4.9624 r m d d ~ k l I*b
ration M asstlc1uted with
1986 undiMbu(4 -mhg8 a d pmq#7
Cwpon~ionMm
' bmch ~
u
m p ~ul i b
of~a n r o~ ~iaeonb,
,
or
Dpesatina in t
b game tBpm1e ~~legorim- #Id-llOr - p e n bpu#
The dividend (and the section 78 inclkion
-puUng
mmmwnt of f w Q n (a*s.
with mped to h dividend) will b ~ t o d m m e d WM undsr 5 t m - t .
u incamein mpamta mtqories and n d d d
to Caporstion M's otbar i n m e , if any.
([email protected]
a tbibutabk to tha mms sepangte &e+ss.
undjajbufd m m j ~010
s firsf-,
Ses a d i o n -Id) ~ n 5dI-.
mmd-,orthird-tiercarpmiionfoprp-

hr&n ta* d i t Ilmita!imn. tbe pOBtro86 lore@
UMS d C o ~ m t i o a A
M'B

$9

~

e l ,d i v e date taxable JWUIS+(~) ~ l r J e .
For purpof computing fcreip
income truces d-ed
psid
5 1 , m Z - l ( b ] ~mpa
i~
to dfvidands
by a first-. second-. or third-tbr
w ~ p o m u ~w
f l ,k n Lhem 18 1 deiicit i n
the p w f - fg86 undistributed earnings or
the1 mrpontion and the mrporation
makes a distribution to shareholders
the1 4s a dividend or would be a
dividendifthirrewemmfpentnt
ernumulstd aomingr and profits. t h ~ n
thepost-1986deficit shallbcarried

938

Federal flegider I Vol. 62. No. 1 / Tliesday, J8nu3ty 7, 1997

-

-

back to the mosl m n t pre-affective
date taxable year of lhe first-, second-.
m hY-tiac o r p ~ t i o owith positive
~ccurnulstedptsfits cornpuled under
&ion 902. ! h e 5 1.902-3(eE For

'

P":

purpases of this S 1.902-2. a pree m d i v e date taxable year is taxsble
F l k i m ( n l bfomJauaq+ 3.191)4
at s taxable year beginning aher
Decembr31.1986,ifthospacia~
effective dale d 5 1.902-1 (8x13)

applies- The deficit
mdum
seaion 9Dz acdumulaled profie in the
most m n t pmffectiw dete year to the
extent hereof. and m y remaining
deficit shlI bs d . d b.d 10 *e

---

preoeding yeer or years until the defidt
is corn lately ellocated.The smount
carrielback shall reduce the deficit in
1986 undisVlbu!ed m i n g s , A n y
oralgn income taxes aid in a posteffective date year wi 1 not be mid

P
mffectiadab h b l e Y

-

hample 2. (I) Frwn 1885 a&
3domestic mrporetbn M n ~ 10opsnad rf
UIB one d r ofstmk offonig.
A. mu n a r i n i q O m
i u=
fh
A's stock liowned by Z,a f~lbw......- ;,
nwpwa-.
C o p m t i o n A im d a'

-

.

:
a-

I
,

to
m at - m w h @
rt.n.h'm
nmove~lmm
fornip income
1~ fulrtbd.q.
au
~axas.SseeectionQ~aadthe
.
~ ~ ~ t t L m a k B o t h G q m d i 0 1 1 ~- *' ,4
regulations
under
the1
d
o
n
for
rules
rPmmingtho&ol&Gdtnnd
t u ~ b h ~M. C oIher dp- oc kr a apr
t i o.rotb.
~,-Ib' :'U
kcomptaiim,d~ignlneooa~
m u * t d p f i . d g - ~ ~- . :.. deernd p i d wi&
-pect to dwmed
amdidbutad oainrrr dsmw
::
fDclusions hm
matmlld ,
1088 uadimbvted-imp.
pp
forelm corpwetiona,
. n d p o a . 1 P 8 B ~ @ ~ ~ , d j m
(2) h ~ l p l e sTbe
. foI10whg exam 1m d v i h d a as m m a. d. z .d b,e.-. . illurn. the rules o l t h i i pamppb
,
.

e-.
-

h

...............-...... --.......-. - . . - - . . . - . . - .. . . 1985 ........ .lW ....
cunwnt E k P ( D e f i h ] of w.A ................ ,..--...*.............,
15I)rr ........ 150u ........
......
Cur~atplusAccumulaLBdB&PofCorp.A.,.
150u .......
3M)U ........
post-'M Undistributed h i f ~ dgGorp.
~
A ..,....,.,,...
,.........,.... ,. ....,,..
pm1-'~5Uudistributtd EarnIrags uf Cwp. A R d u d By Cur- -..-....- ,.
...-.-.-...T ~ b lp
e

y~ $
Disbhutions ( i d by deficit
mybad).
FomigoJncomeTu~~f-.A(A&
lm.. 1nlu.,.-..
post-'& Foreign laTax- of Corp. b ...................... ,.
,t
12/31DisMbulibUs to C0rp. M
0 ....,.- ..... U
~2131Dis~bufionr~Corp.Z
..................................... .- 0
0 ............

.,
.,
,.,
IlDOu].,.
0 .....-.,...
1987
ZO[)u

..............................................

:,,,.,

..."

3-

-

a ...

Zm,,..f m ,
,
I-

,.,

15Qu

~ O b,.u,

,..,.

fonign i n b r taxes. Thsmfm, a*dividend
i s c m ~ k h d id
ofCoqmtion A's
pl-19W u*r*ibut.d .mil..
hdp

..-...-,,

0
UI)

Su,,,,,.

Q

4 5 ~

0-

,,.

...

.

.A

86Q ,
,
,
-

6

..

#b
# ~ r r.
-

.....
$10
,.,,.
$50
.,,,.
.....*...*.............-...... 510 ., ..... $60 .,..,
...--, ..... SU ........, [I ,..,..,.
....... ..............
451 ,.,.....
0 ,
.,.,

t i m e b v n f i o n A b a r m ~ i t o f ~ l m u ) h a.nd+medpaidb
posf.]QH undistributed earnrngs and Ira or
mspsct to the 5u dividao

...

-

.

1
m,
1WQ
1.,A 0

-.......................

(ti) On December 31, iW7,Corpatiotr A
distibutes a 5u dividend to Corporation M
.nd I
dividend b Co
lion 2 At Ih.1

-

Rules &nd ~ e ~ u l e & n i

..

. .

nevm b deemed N d . Tbs lM7 di-d
imal b bs out of-A's 1-5
m ~ ~ l tp&&
. d Fm@

*

ntionMrih
OH $3

"$

~

b

-*,

~

~

b

~

~

4th mpecl to the su dividend paid an

port-~~86f0~~pinrnmetaxe~.TbellOO
~60~5Yi~5u1100u~~Co~ratIonMrnud
vl
hm~r31,tsn,n4uimusd1sol*.
deficit ( b u not
~ the st-1986 lomlgn iP~0r1-18 indude $3 in grws income under Wirn 78
as a d i v i d e d
the income indu*tun and iee S I . W Z - I ~ M ~ I . e t oftha
tmxes) i a arried b a glo aRwt the
LaPba 31, 10111,dl*lded dim-,
scmmulakd profitsof 1886 and removed
the fomign taxes deemed paid ate m b j to
~OOu~Xhi-SOu1drocum&tedp~rad
a ssparale limitation far dividends from
from pod-1986undiitribu~edaamings,The
sou tlZW d u d by 4 € i ~ l2l - l ~ ~ l
~cmrnulplbdpmfi!s for 1886 ore reduced to
~Obcontm~led
section W2 m
>I foreign tones that would have been .
Corpmlion A's psi-lea6 u n z z :
56, [~J(*I-100ul.Ths dividend a paid ou!
hmd paid Lad eU of
~ ' 1
of the mdumd 1986eccumulated profits.
earnings as of jaouary I,1880.are SOU
rbarebddenb n cU,gibh to ampub m
Foreign t a e s deemed paid by Gnrporetion M . It Wu - SOul. G~~ppmtIrm
h's pwt-1Q86
t
taxes demmd plddth
foreign hame taxcs must bs reduced by the ~ o ~ofafornip
with r e a p e to the 5u divldend am 1211
e m n ~ lof
t i-1
tt.rw rhmt uwld bavs b n mspsct tn ths dividend pahi out a(1W
{ I ~ u ~ t i u / ~ 0 See
u l lS. 1-*Z-l(bX9.
deemed p.id if
-tiow
M a dz
~ r p o n t i o aH mus! include- IZu in
-latad
pm6ts) m-u
i.Q
income (mnslated under the rulm eppliuible were eligible to corn u!e an amount aI
A with lhregPea to 1985.
to fnm' n income tmes p i d on miap
dmn.dpidtur~onl.902-llaH8)I+h
f i a m p ~ e ~ , ~ ~
The amount of foreign income taxes thrt
- accum3aled in prwffgcfiva date para)
-tic
cwpors~o,,
M
would bve teen deemed paid if both
seaion 78 ma dividend. Both l e
Ibe one darr of Ftod. nf fm@~ t l m
hcome inclushon and Ihc ioniign taxrrporationsM and 2 wrre eligible to
The
vnt
-or
compute an mount of d ~ m paid
d taxes o m
deemed paid em sub* to a *parale
~
distrfbutd b brpntion
limfiarioa fur d r i d m d ~bw.Corpmtific~A. BI 5 0 dividend
~ ~ = t
A is 530 ~St;OXsu%laOu/lml).
Thue, poria nbncbnmlled s d o n 902 corpmtiw.No
stcurnula!& profit* remain l a Gnrporation A 1986 b m @ ~incoma W e s as aifanusuy 1,
w n m l l d bm@
and
U
.s Itr m o d ~lursney.lu q w L rt d
l
w jh mpect to 1986 afittr the carrybeck of the 1W, am $30 I= - S30h
1987 deficit and tbs &amber 31.1987.
Exompie 2. The facts are the sarns &
mievmttlmm+Both
A -4
&-tian
M US* Lbc dendaryear r ths
dividend disaibutions to Gorporntion~M and Exumpk 1, except that Grpotstion A h a a
2
deficit in its pt-1986mdistrlbuted
- h p - a r . w
h bt.prs-1M7
(lii) Wcsrnbar 31.1969.~rprationA
t s r n i q s of[l5Oul on M m b r 31,1987.
mxmulatbd pmhb and p t - 1 0 8 6
The dcMt Iscarried back to tB86 ~ n d
~ d l * i b u t s d s a m h p or deiidta h
distributes g 5u dlvidend to Grpomfion M
T
year to
end a 45" dividend to C;wporatioo Z At thni Fedurn rn~umulatedprofits ~ P that
1undirbibutd srraiqsa,pp p t p m
O..Thua, t h e foreign lnwms tams paid wilh md pwt-~w
hip k ~m,
t h e ~orpomtionh has 1QOu or posf-1986
pp
undistributed~WZULI@ and S6o of p a t - 1 Q86
to the lWi% maumuhted profits
divf&n& ra
~bhw -

'

m ~ t l m

glh

w*

-,

*
@

&&

................................ -.......*...
......
-......
...-..--. . . . . . .
.-.... ............................"..
......-.-..-..

1986
~ w b k y m
. ..-.-..+......... ...............-......1.3......-..----....
Cu~ntE~P@hdb)~fCmp.A
YOOu
1DOu
Cumnt plus Accumuleted B P of Cwp. A
port-'86 Undistributed Earnings dCorp. A
h t - ' ~odl.tdai$cd
~
Esrningr of-.
A R d u d By Rvrent Year Divdend Distribution8 [inaeaned by delidl
I.I

carrybad).
~migtgp1-6

T w {Annuel) d i h p . A

.......,......-.....,
,
.....

M)u

...,.

.....( 5 w -..-.
5011 .., ,.
(Sbu) -.-..
SO87

--.
#Lbu ,.
1SBBd

¶SOU

,,
+

(Mu).-..-. O

.-.,

..

i W g _ _ Iggg ,
2 ~ .1
7h
2 h *-0
17611,
,
.&
.
-7Sa
1
m
;;,
t ..

.-"-.. .
.,,

7%
:,,

.

.0

...---..

St Zb

a0 .
,

-

0

,-7.

,

.

,
'

e'

.

. .. . . -.
-0
.
..

,

.

,

-

-

,

. - . - ...
.

F

.

.

~ &y
lla. I Vol. 62. No. 4 ~ ' ~ u e s d aJkmby,
~.
7, 1997 / Ruler and Regulations

.

e lNmu ~ a & & ~ a Ap
b 9.
M

12131
12/31Di-m-Z----.--,-

-

.

,
,
,
,

.,,-

0

------------.--1--.-

D

-

0 , .
.,0,..,,
0

-.
.-..-... ---.

11#1---. EM
llki .*--..0
.O

,
,
.
3
.

$40
1Zu

1-

839

-..
-...,-.
-..

0
0
0

*I

-

m)h

.

-

uadw d o n 78. fhe in-

inclualtm and
armpulad under d o n 964(a). Sss
d m s d pald II.
&on
md
undsr '
domdlvidandb
Z At th.t
aubNt b a wparate ILmitatJon for dividends
for des
governing
r h Y = p ~ . ( - l W 6
k n o m m t m l M . d . . m D . w 2 ~ t I a n @ornard
of b6dts and the
undishibotdirming d S 1 2 0 i n ' L * palAf orbuuy 1 . 1 9 9 1 , ~ t i o d
n'l
aompula~on
alrmip
1 ~ f i ~ ~ . & q m d h n M ~ 1i 9 t8 6 u m W b u t e d u a m I n g s m m O
to deemed
deemed @d with
Il-tO[ruJ.
8 h (1-20u)
ol -ulrtd
k s d , & $ 1 . ~ ~ - 1 f i ) ( lto
] .b.m p.id
h m e inclusions hum controlled
$12 ($1~xiO#tfOu1100uJ)
d h p t - 1 pmEb&I*ltb
to I-.
f g . ~ ~ t u r e r p a l d b y ~ t i o n ~A w k e i g a ~ m m ~ d ~ mforeigowporetions.Fortraadation
u r ~ ~
mud in*
t h t uwwi b
hamme
ma S I O d u d by Slo d
d e 6 governing
Z e d s of defidts
U ~ a
M
7a .r *&mi
Both t&
- hm*
ppid
would ham k n
i,p-1887 e
ated profits to postNdif both GrFhi
ti
and
onl
i n a m kIruion md the f o m b w
j Q86 taxable years of a foreign
w m eligible to cornpula au w
t of
dsmerdpridwmrubJsato8wp~
corporation
with a dollar functional
paid b
s
t
ths Idivided
lidbm hdivj&m& h n wwnbolld d-od
cur-ey.
see
S l.aB=ld)t2l.
d c m
-tion
A Corpant(on A'*
-tion
A wt or p001.f
pmt-1986u n ~ b u t s pd r d q s uof
(2) Effect o f p r e - e f i d dote decit.
lml).-tion
A hs M u offmig'
b w 1,1?l39. 0 I1001r100u). lb
If a fweip corporation has a defidt in
1-*
1~~h1gotuwmof
I . 1989. .Lo hmmt
nm.-ulmtd
p f i b u of tho end of i t s
mreducsd by16uIaoux20rr1100u1
of
~ 0 , f l a o ~ b y ~ ~ W o
last meffecdve date m b l e year, then
h
j
g
n
h
a
w
a
t
u
e
r
tbat
would
have
been
p
l
d
t
h
r
~
would
have
been
bmmr
the treycorporation -d
pay a
dwmed paid if Corpmtions M wd 2 h t b
d-d
pid~ f w
w ~ M md Z
dinden out of p m e f f d v e date years
were eligible to mmputr an s m w t of
.m~IigibIrID m u h w m u l i t of
unless hen?
is M ndjustment made (for
on Ib 20u dividend
b@
brrn.8pid an tbt dividmd
drmed pdd
-

s1,1m.-~on

A

M b u b m l[k dirridsnd b - ~ m

M

MW

Y

ybe m-

~ ~ ~ ~ A ( $ ~ ~-dir~butcdbyCwpom1ionAoutolfPs8
x I w # [ I W
example.amfundofforefpta*esdd)
imll. .
-Mpmiits.
that restores seaion 902 accumule d
li)Oa m b 3 1 ,?DW.* w
A
(b)
of&.fia
prt
profits to a preeffeclive date iax& 3
- i n
lhmdsrrd''-M
is87 oecumuloted profits
year or years. Moreover, if a foreig
of a first-,
and rn i[Wu dividand ho Co~poration2 At
802
tht
A hu
1n iuptsecond-, or third-tier E
O
~ to O
~ cOTpo"tion has a deficit i
n
p
H
1
Q86
undistn'buted
&&F
for
accumulated
profits
as
oi
&a
end
0
its
md SO in iu
LLd.
k t pre*fldve date taxable W, hen
p ~ - ~ B & ~ ~ I l * s r . T b s purposes of section 902-(1) G e n e d
rule. For pwposes of corn
foreim no deficit in pwt-1986u n d i d b u b I
dividend t +d out of +-I@=
.h
g wiU be carried bclr unde.
udisbiha
to the hxtrnt t h m f
inarme tkxes deemed @ under
pafepph (81 of this section. For no H
(lCKm1.md tba -dot
of 2 h @d
5 1.m2-l@)wifirespect tp dividends
of 14a6 . m u h a d profib. Under 5 1.Wzc o ~ c B m I n gcarrybecks of alfdble
p i d by a m.,-nd-,
ar third-tier
i ( b l ( z I . ~ e 1 ~ ~ v l ~ d orationoutofpost-lgsg
~ ~ t ~ ~ M ~ ~
deed& horn post-1986 undistribu' i
d-d
a h pddouldpoa.1088
mdi.bihtd-.o~a-tD~~~
whrj, Mcit
~fl~stn'butalearnh~s~tbeamounfda
in a m r m d 1 d profits afLb.
~ ~
pmfit.
t computed
o ~ u under
~ sxtia
P ~ ;- 1
xl~m
&m ~
964(aIp
t
m
d
o
n
Qm
md
the
Inreign corporathn det-nd
under
d
d b k prid out of -tion
AI
section 902 as o1 the end of its last re- m a t i o n 6 under that section.
1986
p 6 b ~IdIarly.
IDB~ dividend to -tion
Zb deemed
sEective date taxeble year is earrl:e l
(3)Examples. The following
ples
tm p d d aut of pt-1P86 undistributd
f o w d and r e d u = , ~ - l 9 8 6
illustrate the d e s of this p a p a p t (b):
wm (lmxlDBul
undistributed s a d q s on the h t day
fiample +,
dd
to b.
10,,, hlL
lCd,
udthe
lBu
of the foreign corpanllonls 6rs! taxabla domatic m-tim
-l
of
p r i d o u t o f ~ A L 1 W
. .
g afler k m b e r 31*1986* the on, class of rlocl. of foreign mrponhm
e
d
ts. Fom@ inoom0 MD Year M

='r

iuw

'

9

B

-

ma

d - ~ * l d ~ ~ ~ m d a r r a t i ~m
r~nthebtda~ofthetlnttaxable * . f i e n m a i n i ~ 0 0 p m n t o ~ ~ t l o .
902~i&-t0
sportlonorh
year In wbieh rhs ownership
A's sock i s ownmi by ~otporatiw I
d i ~ i d m dpaid wttofpol~-~ww
-distributed - m p h m e n t s of d o n 902(c1(3)@) and fore@ corporation. Corporation A b not
~ ~ ~ ( ~ ~ ~ 1 ~ % 1 1 0 1 r 1 1 0. $l.gD2-l(a)(l)chrough(4)1remetilthe
0 u ~ ) , m d
rnabolldforalgncorpo~~~on~~tb~u
spedd affective dale of$1.902-1(a)(13)
09 it* h t i o n a l m n q . 1u squall $1 at all
frasw tuss h d paid by G v s a M
with
to the
On of
divid-d
applies. Any foreim income
pdd
d a v m t timss. B0tb &-don
A md
to a
dabyaU
CD'poration M ur tb0 d e n & p~
M &a
d y p i d la i s 0 m c c t m u h t s d p d t . ~&
m b l e year. Ccrpmciw.A has p . 1 ~ 8 7
are 1.n (m W l a ) .Corporetian mUd =ha]] not k uvried fonvardand
Induds U plru 1 . 6 tnmlmted
~
undm ths
8ccumuhted pmfit~or defidta In
de
rnpplirtm
hmjnm tusspld
in post-1g86fornip
hcome - - accumulated profib and
lax=. Post-lg86
undislriiutdd g s u~distributsdwmiogr. pays pm-1087 md
on e
s -uIottd
In w b l s psur
may not reduced by
mount ofa
p o s t - l B 8 6 foreign l n c ~ m ataxes, md p y ,
prim, lo rhe ~~w &la of thr T w Etsfmra
Md
h m m r r . dirldtnd
p-1983 deficit in earnings and pmfitg dividands as aunmarirsd b l o w : .

'

OF

p-adve

'
.--.....----.-.~-.-.-........
-..............-- --...........--.....-............
.

T-bb
-.-'-....-...- ....
hntE.PDfidts]-pfCatp.A
Current P l u -&td
E h P Wfiu'ts)of
A .,,..,.........,..
p d - ' U~&&tgd
~
M i of Gorp. A
....................... ,....
M - ' 8 6 h d i h b u t o d E a r d q ~of 9 r p . A R e d u d By C m n t Year iddsad DiskIbuti~ruf m d d by deficit m o w a d ) .
F e ~ & ~ m m s T ~ [ A n n u a l ) a f C w p . ,A
.., ..... ....--..- .,..,..
....
Pmt-'& F~~
b m m s Tues of h p 4 ....-..-.--........, ..... ..-. ..-...
:12/33 M h t i o m to CapCap
M ,.-I-- .... ..... ........... -..-.-.......................
12131 m h u a o s to Cwp. Z .,...,-...r-.-,,,I,,-,......,...,.....,,.........
3 '

.

w.
--

-

-

..:-..
..........
....,....
....-...................,......... Z.-O..............
u .......-.
....
0 .......,
.....
0 .-.-...,-,

d d d d d d d d d . . .

-

1881
2 5 ~
ZSu

........
......
(75u) ........
......--.......
,.,..,..
5U.- .........
0 ...-......i. ..
0 ..;-.........
1W5

(1Wd

...-...lit-...

........ 1887 ........ 1888
........ ZOOu ..,. lWu
...... 1IK)u ....*...
-.....-........ I O O ~ ,..
.-....-........ [Mu).....;.. S&I
0 ...........,.
flMi ,.....
f$O
.I .... ...... Slm ........ jM
0 .............. 1Su .......... 0
0 -............ 13Su ,......
0
f 886
(25~)
(In)

.

7

~