26 C.F.R. §§ 1.861-9–1.861-11T

6 sections in range

§1.861-9. Allocation and apportionment of interest expense and rules for asset-based apportionment.

26 C.F.R. § 1.861-9

(a)

In general. For further guidance, see § 1.861-9T(a).

(b)

Interest equivalent—

(1)

Certain expenses and losses—

(i)

General rule. Any expense or loss (to the extent deductible) incurred in a transaction or series of integrated or related transactions in which the taxpayer secures the use of funds for a period of time is subject to allocation and apportionment under the rules of this section and § 1.861-9T(b) if such expense or loss is substantially incurred in consideration of the time value of money. However, the allocation and apportionment of a loss under this paragraph (b) and § 1.861-9T(b) does not affect the characterization of such loss as capital or ordinary for any purpose other than for purposes of the section 861 regulations (as defined in § 1.861-8(a)(1)).

(ii)

Examples. For further guidance, see § 1.861-9T(b)(1)(ii).

(2)

Certain foreign currency borrowings. For further guidance, see § 1.861-9T(b)(2) through (7).

(3)

-(7) [Reserved]

(8)

Guaranteed payments. Any deductions for guaranteed payments for the use of capital under section 707(c) are allocated and apportioned in the same manner as interest expense.

(c)

Allowable deductions. For further guidance, see § 1.861-9T(c) introductory text.

(1)

Disallowed deductions. For further guidance, see § 1.861-9T(c)(1) through (4).

(2)

-(4) [Reserved]

(5)

Section 163(j). If a taxpayer is subject to section 163(j), the taxpayer's deduction for business interest expense is limited to the sum of the taxpayer's business interest income, 30 percent of the taxpayer's adjusted taxable income for the taxable year, and the taxpayer's floor plan financing interest expense. In the taxable year that any deduction is permitted for business interest expense with respect to a disallowed business interest carryforward, that business interest expense is apportioned for purposes of this section under rules set forth in paragraph (d), (e), or (f) of this section (as applicable) as though it were incurred in the taxable year in which the expense is deducted.

(d)

Apportionment rules for individuals, estates, and certain trusts. For further guidance, see § 1.861-9T(d).

(e)

Partnerships—

(1)

In general—aggregate rule. For further guidance, see § 1.861-9T(e)(1).

(2)

Corporate partners whose interest in the partnership is 10 percent or more. A corporate partner shall apportion its interest expense, including the partner's distributive share of partnership interest expense, by reference to the partner's assets, including the partner's pro rata share of partnership assets, under the rules of paragraph (f) of this section if the corporate partner's direct and indirect interest in the partnership (as determined under the attribution rules of section 318) is 10 percent or more. A corporation using the tax book value method or alternative tax book value method of apportionment shall use the partnership's inside basis in its assets, including adjustments under sections 734(b) and 743(b), if any, and adjusted to the extent required under § 1.861-10T(d)(2).

(3)

Individual partners who are general partners or who are limited partners with an interest in the partnership of 10 percent or more. An individual partner is subject to the rules of this paragraph (e)(3) if either the individual is a general partner or the individual's direct and indirect interest (as determined under the attribution rules of section 318) in the partnership is 10 percent or more. The individual shall first classify his or her distributive share of partnership interest expense as interest incurred in the active conduct of a trade or business, as passive activity interest, or as investment interest under regulations issued under sections 163 and 469. The individual must then apportion his or her interest expense, including the partner's distributive share of partnership interest expense, under the rules of paragraph (d) of this section. Each such individual partner shall take into account his or her distributive share of the partnership gross income or pro rata share of the partnership assets in applying such rules. An individual using the tax book value or alternative tax book value method of apportionment shall use the partnership's inside basis in its assets, including adjustments under sections 734(b) and 743(b), if any, and adjusted to the extent required under § 1.861-10T(d)(2).

(4)

Entity rule for less than 10 percent limited partners—

(i)

Partnership interest expense. A limited partner (whether individual or corporate), whose ownership, together with ownership by persons that bear a relationship to the partner described in section 267(b) or section 707, of the capital and profits interests of the partnership is less than 10 percent directly allocates its distributive share of partnership interest expense to its distributive share of partnership gross income. Under § 1.904-4(n)(1)(ii), such a partner's distributive share of foreign source income of the partnership is treated as passive income (subject to the high-taxed income exception of section 904(d)(2)(B)(iii)(II)), except in the case of income from a partnership interest held in the ordinary course of the partner's active trade or business, as defined in § 1.904-4(n)(1)(ii)(B). A partner's distributive share of partnership interest expense (other than partnership interest expense that is directly allocated to identified property under § 1.861-10T) is apportioned in accordance with the partner's relative distributive share of gross foreign source income in each separate category and of gross domestic source income from the partnership. To the extent that partnership interest expense is directly allocated under § 1.861-10T, a comparable portion of the income to which such interest expense is allocated is disregarded in determining the partner's relative distributive share of gross foreign source income in each separate category and domestic source income. The partner's distributive share of the interest expense of the partnership that is directly allocable under § 1.861-10T is allocated according to the treatment, after application of § 1.904-4(n)(1), of the partner's distributive share of the income to which the expense is allocated.

(ii)

Other interest expense of the partner. For further guidance, see § 1.861-9T(e)(4)(ii).

(5)

Tiered partnerships. For further guidance, see § 1.861-9T(e)(5) through (7).

(6)

-(7) [Reserved]

(8)

Special rule for downstream partnership loans—

(i)

In general. For purposes of apportioning interest expense that is not directly allocable under paragraph (e)(4) of this section or § 1.861-10T, the disregarded portion of a downstream partnership loan is not considered an asset of a downstream partnership loan lender (DPL lender). The disregarded portion of a downstream partnership loan is the portion of the value of the loan (as determined under paragraph (h)(4)(i) of this section) that bears the same proportion to the total value of the loan as the matching income amount that is included by the DPL lender for a taxable year with respect to the loan bears to the total amount of downstream partnership loan interest income (DPL interest income) that is included directly or indirectly in gross income by the DPL lender with respect to the loan during that taxable year.

(ii)

Treatment of interest expense and interest income attributable to a downstream partnership loan. If a DPL lender (or any other person in the same affiliated group as the DPL lender) takes into account a distributive share of downstream partnership loan interest expense (DPL interest expense), the DPL lender must assign an amount of DPL interest income corresponding to the matching income amount for the taxable year that is attributable to the same loan to the same statutory and residual groupings as the statutory and residual groupings of gross income from which the DPL interest expense is deducted (or would be deducted, without regard to any limitations on the deductibility of interest, such as section 163(j)) by the DPL lender (or any other person in the same affiliated group as the DPL lender).

(iii)

Anti-avoidance rule for third party back-to-back loans. If, with a principal purpose of avoiding the rules in this paragraph (e)(8), a person makes a loan to a person that is not related (within the meaning of section 267(b) or 707) to the lender, the unrelated person makes a loan to a partnership, and the first loan would constitute a downstream partnership loan if made directly to the partnership, then the rules of this paragraph (e)(8) apply as if the first loan was made directly to the partnership and the interest expense paid by the partnership is treated as made with respect to the first loan. Such a series of loans will be subject to this recharacterization rule without regard to whether there was a principal purpose of avoiding the rules in this paragraph (e)(8) if the loan to the unrelated person would not have been made or maintained on substantially the same terms but for the loan of funds by the unrelated person to the partnership. The principles of this paragraph (e)(8)(iii) also apply to similar transactions that involve more than two loans and regardless of the order in which the loans are made.

(iv)

Anti-avoidance rule for loans held by CFCs. A loan receivable held by a controlled foreign corporation with respect to a loan to a partnership in which a United States shareholder (as defined in § 1.904-5(a)(4)(vi)) of the controlled foreign corporation owns an interest, directly or indirectly through one or more other partnerships or other pass-through entities (as defined in § 1.904-5(a)(4)(iv)), is recharacterized as a loan receivable held directly by the United States shareholder with respect to the loan to such partnership for purposes of this paragraph (e)(8) if the loan was made or transferred with a principal purpose of avoiding the rules in this paragraph (e)(8). An appropriate amount of income derived by the United States shareholder (or any other person in the same affiliated group as the United States shareholder) from the controlled foreign corporation is treated as DPL interest income. Appropriate adjustments must be made to the value and characterization of the stock of the controlled foreign corporation under §§ 1.861-9 and 1.861-12 in order to reflect the portion of the downstream partnership loan held by the controlled foreign corporation that is disregarded under paragraph (e)(8)(i) of this section.

(v)

Interest equivalents. The principles of this paragraph (e)(8) apply in the case of a partner, or any person in the same affiliated group as the partner, that takes into account a distributive share of an expense or loss (to the extent deductible) that is allocated and apportioned in the same manner as interest expense under §§ 1.861-9(b) and 1.861-9T(b) and has a matching income amount (treating such interest equivalent as interest income or expense for purposes of paragraph (e)(8)(vi)(B) of this section) with respect to the transaction that gives rise to that expense or loss.

(vi)

Definitions. For purposes of this paragraph (e)(8), the following definitions apply.

(A)

Affiliated group. The term affiliated group has the meaning provided in § 1.861-11(d)(1).

(B)

Matching income amount. The term matching income amount means the lesser of the total amount of the DPL interest income included directly or indirectly in gross income by the DPL lender for the taxable year with respect to a downstream partnership loan or the total amount of the distributive shares of the DPL interest expense of the DPL lender (or any other person in the same affiliated group as the DPL lender) with respect to the loan.

(C)

Downstream partnership loan. The term downstream partnership loan means a loan to a partnership for which the loan receivable is held, directly or indirectly through one or more other partnerships or other pass-through entities (as defined in § 1.904-5(a)(4)), by a person (or any person in the same affiliated group as such person) that owns an interest, directly or indirectly through one or more other partnerships or other pass-through entities, in the partnership.

(D)

Downstream partnership loan interest expense (DPL interest expense). The term downstream partnership loan interest expense, or DPL interest expense, means an item of interest expense paid or accrued with respect to a downstream partnership loan, without regard to whether the expense was currently deductible (for example, by reason of section 163(j) or the election to waive deductions pursuant to § 1.59A-3(c)(6)).

(E)

Downstream partnership loan interest income (DPL interest income). The termdownstream partnership loan interest income, or DPL interest income, means an item of gross interest income received or accrued with respect to a downstream partnership loan.

(F)

Downstream partnership loan lender (DPL lender). The term downstream partnership loan lender, or DPL lender, means the person that holds the receivable with respect to a downstream partnership loan. If a partnership holds the receivable, then any partner in the partnership (other than a partner described in paragraph (e)(4)(i) of this section) is also considered a DPL lender.

(vii)

Examples. The following examples illustrate the application of the rules in this paragraph (e)(8).

(A)

Example 1— (1) Facts. US1, a domestic corporation, directly owns 60% of PRS, a foreign partnership that is not engaged in a U.S. trade or business. The remaining 40% of PRS is directly owned by US2, a domestic corporation that is unrelated to US1. US1, US2, and PRS all use the calendar year as their taxable year. In Year 1, US1 loans $1,000x to PRS. For Year 1, US1 has $100x of interest income with respect to the loan and PRS has $100x of interest expense with respect to the loan. US1's distributive share of the interest expense is $60x. Under paragraph (e)(2) of this section, $45x of US1's distributive share of the interest expense is apportioned to U.S. source income and $15x is apportioned to foreign source foreign branch category income. Under paragraph (h)(4)(i) of this section, the total value of the loan between US1 and PRS is $1,000x.

(2) Analysis. The loan by US1 to PRS is a downstream partnership loan and US1 is a DPL lender. Under paragraph (e)(8)(vi)(B) of this section, the matching income amount is $60x, the lesser of the DPL interest income included by US1 with respect to the loan for the taxable year ($100x) and US1's distributive share of the DPL interest expense ($60x). Under paragraph (e)(8)(ii) of this section, US1 assigns $45x of the DPL interest income to U.S. source income and $15x of the DPL interest income to foreign source foreign branch category income. The source and separate category of the remaining $40x of US1's DPL interest income is determined under the generally applicable rules. Under paragraph (e)(8)(i) of this section, the disregarded portion of the downstream partnership loan is $600x ($1,000x × $60x/$100x).

(B)

Example 2— (1) Facts. The facts are the same as in paragraph (e)(8)(vii)(A)(1) of this section (the facts in Example 1), except that US1 and US2 are part of the same affiliated group, US2's distributive share of the interest expense is $40x, and under paragraph (e)(2) of this section, $30x of US2's distributive share of the interest expense is apportioned to U.S. source income and $10x is apportioned to foreign source foreign branch category income.

(2) Analysis. The loan by US1 to PRS is a downstream partnership loan and US1 is a DPL lender. Under paragraph (e)(8)(vi)(B) of this section, the matching income amount is $100x, the lesser of the DPL interest income included by US1 with respect to the loan for the taxable year ($100x) and the total amount of US1 and US2's distributive shares of the DPL interest expense ($100x). Under paragraph (e)(8)(ii) of this section, US1 assigns $75x of the DPL interest income to U.S. source income and $25x of the DPL interest income to foreign source foreign branch category income. Under paragraph (e)(8)(i) of this section, the disregarded portion of the downstream partnership loan is $1,000x ($1,000x × $100x/$100x).

(C)

Example 3— (1) Facts. US1, a domestic corporation, owns 80% of PRS, a foreign partnership that is not engaged in a U.S. trade or business. The remaining 20% of PRS is owned by US2, a domestic corporation that is unrelated to US1. US1, US2, and PRS all use the calendar year as their taxable year. In Year 1, US1 loans $3,000x to Bank and Bank loans $3,000x to PRS. US1 makes the loan to Bank with a principal purpose of avoiding the rules in this paragraph (e)(8). For Year 1, US1 has $150x of interest income with respect to the loan to Bank and PRS has $175x of interest expense with respect to the loan from Bank. US1's distributive share of the interest expense is $140x. Under paragraph (e)(2) of this section, $126x of US1's distributive share of the interest expense is apportioned to U.S. source income and $14x is apportioned to foreign source foreign branch category income. Under paragraph (h)(4)(i) of this section, the total value of the loan between US1 and PRS is $3,000x.

(2) Analysis. Under paragraph (e)(8)(iii) of this section, because the loan from US1 to Bank is made with a principal purpose of avoiding the rules of this paragraph (e)(8), the rules of this paragraph (e)(8) apply as if the loan by US1 to Bank was made directly to PRS. Accordingly, the loan by US1 to Bank is a downstream partnership loan and US1 is a DPL lender. Under paragraph (e)(8)(vi)(B) of this section, the matching income amount is $140x, the lesser of the DPL interest income included by US1 with respect to the loan for the taxable year ($150x) and US1's distributive share of the DPL interest expense ($140x). Under paragraph (e)(8)(ii) of this section, US1 assigns $126x of the DPL interest income to U.S. source income and $14x of the DPL interest income to foreign source foreign branch category income. The source and separate category of the remaining $10x of US1's DPL interest income is determined under the generally applicable rules. Under paragraph (e)(8)(i) of this section, the disregarded portion of the downstream partnership loan is $2,800x ($3,000x × $140x/$150x).

(D)

Example 4— (1) Facts. US1, a domestic corporation, directly owns all of the outstanding stock of CFC, a controlled foreign corporation, and 90% of PRS, a foreign partnership that is not engaged in a U.S. trade or business. The remaining 10% of PRS is owned by US2, a domestic corporation that is unrelated to US1 and CFC. US1, US2, and PRS all use the calendar year as their taxable year. In Year 1, US1 loans $900x to CFC and CFC loans $900x to PRS. CFC makes the loan with a principal purpose of avoiding the rules in this paragraph (e)(8). For Year 1, CFC has $90x of interest income and $90x of interest expense with respect to the loan to PRS, and US1 has $90x of interest income with respect to the loan to CFC. PRS has $90x of interest expense with respect to the loan, and US1's distributive share of the interest expense is $81x. Under paragraph (e)(2) of this section, $54x of US1's distributive share of the interest expense is apportioned to U.S. source income and $27x is apportioned to foreign source foreign branch category income. Under paragraph (h)(4)(i) of this section, the total value of the loan between CFC and PRS is $900x.

(2) Analysis. Under paragraph (e)(8)(iv) of this section, because the loan from CFC to PRS is made with a principal purpose of avoiding the rules of this paragraph (e)(8), the loan from CFC to PRS is recharacterized as a loan receivable held directly by US1, and an appropriate amount of income derived by US1, in this case, the $90x of interest income from the loan to CFC, is treated as DPL interest income. Accordingly, the loan from CFC to PRS is a downstream partnership loan and US1 is a DPL lender. Under paragraph (e)(8)(vi)(B) of this section, the matching income amount is $81x, the lesser of the DPL interest income included by US1 ($90x) and US1's distributive share of the DPL interest expense ($81x). Under paragraph (e)(8)(ii) of this section, US1 assigns $54x of the DPL interest income to U.S. source income and $27x of the DPL interest income to foreign source foreign branch category income. The source and separate category of the remaining $9x of US1's interest income is determined under the generally applicable rules. Under paragraph (e)(8)(i) of this section, the disregarded portion of the downstream partnership loan is $810x ($900x x $81x/$90x). Appropriate adjustments are made to the value and characterization of the stock of CFC under §§ 1.861-9 and 1.861-12 in order to reflect the $810x disregarded portion of the downstream partnership loan.

(9)

Special rule for upstream partnership loans—

(i)

In general. For purposes of apportioning interest expense that is not directly allocable under paragraph (e)(4) of this section or § 1.861-10T, an upstream partnership loan debtor's (UPL debtor) pro rata share of the value of the upstream partnership loan (as determined under paragraph (h)(4)(i) of this section) is not considered an asset of the UPL debtor taken into account as described in paragraphs (e)(2) and (3) of this section.

(ii)

Treatment of interest expense and interest income attributable to an upstream partnership loan. If a UPL debtor (or any other person in the same affiliated group as the UPL debtor) takes into account a distributive share of upstream partnership loan interest income (UPL interest income), the UPL debtor (or any other person in the same affiliated group as the UPL debtor) assigns an amount of its distributive share of the UPL interest income equal to the matching expense amount for the taxable year that is attributable to the same loan to the same statutory and residual groupings using the same ratios as the statutory and residual groupings of gross income from which the upstream partnership loan interest expense (UPL interest expense) is deducted by the UPL debtor (or any other person in the same affiliated group as the UPL debtor). Therefore, the amount of the distributive share of UPL interest income that is assigned to each statutory and residual grouping is the amount that bears the same proportion to the matching expense amount as the UPL interest expense in that statutory or residual grouping bears to the total UPL interest expense of the UPL debtor (or any other person in the same affiliated group as the UPL debtor).

(iii)

Anti-avoidance rule for third party back-to-back loans. If, with a principal purpose of avoiding the rules in this paragraph (e)(9), a partnership makes a loan to a person that is not related (within the meaning of section 267(b) or 707) to the lender, the unrelated person makes a loan to a direct or indirect partner in the partnership (or any person in the same affiliated group as a direct or indirect partner), and the first loan would constitute an upstream partnership loan if made directly to the direct or indirect partner (or person in the same affiliated group as a direct or indirect partner), then the rules of this paragraph (e)(9) apply as if the first loan was made directly by the partnership to the partner (or affiliate of the partner), and the interest expense paid by the partner is treated as made with respect to the first loan. Such a series of loans will be subject to the recharacterization rule in this paragraph (e)(9)(iii) without regard to whether there was a principal purpose of avoiding the rules in this paragraph (e)(9) if the loan to the unrelated person would not have been made or maintained on substantially the same terms but for the loan of funds by the unrelated person to the direct or indirect partner (or affiliate of the partner). The principles of this paragraph (e)(9)(iii) also apply to similar transactions that involve more than two loans and regardless of the order in which the loans are made.

(iv)

Interest equivalents. The principles of this paragraph (e)(9) apply in the case of a partner, or any person in the same affiliated group as the partner, that takes into account a distributive share of income and has a matching expense amount (treating any interest equivalent described in paragraph (b) of this section and § 1.861-9T(b) as interest income or expense for purposes of paragraph (e)(9)(v)(B) of this section) that is allocated and apportioned in the same manner as interest expense under paragraph (b) of this section and § 1.861-9T(b).

(v)

Definitions. For purposes of this paragraph (e)(9), the following definitions apply.

(A)

Affiliated group. The term affiliated group has the meaning provided in § 1.861-11(d)(1).

(B)

Matching expense amount. The term matching expense amount means the lesser of the total amount of the UPL interest expense taken into account directly or indirectly by the UPL debtor for the taxable year with respect to an upstream partnership loan or the total amount of the distributive shares of the UPL interest income of the UPL debtor (or any other person in the same affiliated group as the UPL debtor) with respect to the loan.

(C)

Upstream partnership loan. The term upstream partnership loan means a loan by a partnership to a person (or any person in the same affiliated group as such person) that owns an interest, directly or indirectly through one or more other partnerships or other pass-through entities (as defined in § 1.904-5(a)(4)(iv)), in the partnership.

(D)

Upstream partnership loan debtor (UPL debtor). The term upstream partnership loan debtor, or UPL debtor, means the person that has the payable with respect to an upstream partnership loan. If a partnership has the payable, then any partner in the partnership (other than a partner described in paragraph (e)(4)(i) of this section) is also considered a UPL debtor.

(E)

Upstream partnership loan interest expense (UPL interest expense). The term upstream partnership loan interest expense, or UPL interest expense, means an item of interest expense paid or accrued with respect to an upstream partnership loan, without regard to whether the expense was currently deductible (for example, by reason of section 163(j) or the election to waive deductions pursuant to § 1.59A-3(c)(6)).

(F)

Upstream partnership loan interest income (UPL interest income). The term upstream partnership loan interest income, or UPL interest income, means an item of gross interest income received or accrued with respect to an upstream partnership loan.

(vi)

Examples. The following examples illustrate the application of this paragraph (e)(9).

(A)

Example 1— (1) Facts. US1, a domestic corporation, directly owns 60% of PRS, a foreign partnership that is not engaged in a U.S. trade or business. The remaining 40% of PRS is directly owned by US2, a domestic corporation that is unrelated to US1. US1, US2, and PRS all use the calendar year as their taxable year. In Year 1, PRS loans $1,000x to US1. For Year 1, US1 has $100x of interest expense with respect to the loan and PRS has $100x of interest income with respect to the loan. US1's distributive share of the interest income is $60x. Under paragraph (e)(2) of this section, $75x of US1's interest expense with respect to the loan is allocated and apportioned to U.S. source income and $25x is allocated and apportioned to foreign source foreign branch category income. Under paragraph (h)(4)(i) of this section, US1's share of the total value of the loan between US1 and PRS is $600x.

(2) Analysis. The loan by PRS to US1 is an upstream partnership loan and US1 is an UPL debtor. Under paragraph (e)(9)(iv)(B) of this section, the matching expense amount is $60x, the lesser of the UPL interest expense taken into account by US1 with respect to the loan for the taxable year ($100x) and US1's distributive share of the UPL interest income ($60x). Under paragraph (e)(9)(ii) of this section, US1 assigns $45x of the UPL interest income to U.S. source income ($60x × $75x/$100x) and $15x of the UPL interest income to foreign source foreign branch category income ($60x × $25x/$100x). Under paragraph (e)(9)(i) of this section, the disregarded portion of the upstream partnership loan is $600x, and is not taken into account as described in paragraphs (e)(2) and (3) of this section.

(B)

Example 2— (1) Facts. The facts are the same as in paragraph (e)(9)(vi)(A)(1) of this section (the facts in Example 1), except that US1 and US2 are part of the same affiliated group with the same ratio of U.S. and foreign assets that US1 had in paragraph (e)(9)(vi)(A)(1), US2's distributive share of the interest income is $40x, and under paragraph (h)(4)(i) of this section US2's share of the total value of the loan between US1 and PRS is $400x.

(2) Analysis. The loan by PRS to US1 is an upstream partnership loan and US1 is an UPL debtor. Under paragraph (e)(9)(iv)(B) of this section, the matching expense amount is $100x, the lesser of the UPL interest expense taken into account by US1 with respect to the loan for the taxable year ($100x) and the total amount of US1 and US2's distributive shares of the UPL interest income ($100x). Under paragraph (e)(9)(ii) of this section, US1 and US2 assign $75x of their total UPL interest income to U.S. source income ($100x × $75x/$100x) and $25x of their total UPL interest income to foreign source foreign branch category income ($100x × $25x/$100x). Under paragraph (e)(9)(i) of this section, the disregarded portion of the upstream partnership loan is $1,000x, the total amount of US1 and US2's share of the loan between US1 and PRS, and is not taken into account as described in paragraphs (e)(2) and (3) of this section.

(10)

Characterizing certain partnership assets as foreign branch category assets. For purposes of applying this paragraph (e) to section 904 as the operative section, a partner that is a United States person that has a distributive share of partnership income that is treated as foreign branch category income under § 1.904-4(f)(1)(i)(B) characterizes its pro rata share of the partnership assets that give rise to such income as assets in the foreign branch category.

(f)

Corporations—

(1)

Domestic corporations. For further guidance, see § 1.861-9T(f)(1).

(2)

Section 987 QBUs of domestic corporations—

(i)

In general. In the application of the asset method described in paragraph (g) of this section, a domestic corporation—

(A)

Takes into account the assets of any section 987 QBU (as defined in § 1.987-1(b)(2)), translated according to the rules set forth in paragraph (g) of this section; and

(B)

Combines with its own interest expense any deductible interest expense incurred by a section 987 QBU, translated according to the rules under section 987.

(ii)

Coordination with section 987(3). For purposes of computing foreign currency gain or loss under section 987(3) (including section 987 gain or loss recognized under § 1.987-5), the rules of this paragraph (f)(2) do not apply. See § 1.987-4.

(iii)

Example. The following example illustrates the application of the rules in this paragraph (f)(2).

(A)

Facts. X is a domestic corporation that operates B, a branch doing business in a foreign country. B is a section 987 QBU (as defined in § 1.987-1(b)(2)) as well as a foreign branch (as defined in § 1.904-4(f)(3)(iii)). In 2020, without regard to B, X has gross domestic source income of $1,000x and gross foreign source general category income of $500x and incurs $200 of interest expense. Using the tax book value method of apportionment, X, without regard to B, determines the value of its assets that generate domestic source income to be $6,000x and the value of its assets that generate foreign source general category income to be $1,000x. Applying the translation rules of section 987, X (through B) earned $500 of gross foreign source foreign branch category income and incurred $100x of interest expense. B incurred no other expenses. For 2020, the average functional currency book value of B's assets that generate foreign source foreign branch category income translated at the year-end rate for 2020 is $3,000x.

(B)

Analysis. The combined assets of X and B for 2020 (averaged under § 1.861-9T(g)(3)) consist 60% ($6,000x/$10,000x) of assets generating domestic source income, 30% ($3,000x/$10,000x) of assets generating foreign source foreign branch category income, and 10% ($1,000x/$10,000x) of assets generating foreign source general category income. The combined interest expense of X and B is $300x. Thus, $180x ($300x x 60%) of the combined interest expense is apportioned to domestic source income, $90x ($300x × 30%) is apportioned to foreign source foreign branch category income, and $30x ($300x × 10%) is apportioned to foreign source general category income, yielding net U.S. source income of $820 ($1,000x−$180x), net foreign source foreign branch category income of $410 ($500x−$90x), and net foreign source general category income of $470x ($500x−$30x).

(3)

Controlled foreign corporations—

(i)

In general. For purposes of computing subpart F income and tested income and computing earnings and profits for all Federal income tax purposes, the interest expense of a controlled foreign corporation may be apportioned using either the asset method described in paragraph (g) of this section or the modified gross income method described in paragraph (j) of this section, subject to the rules of paragraphs (f)(3)(ii) and (iii) of this section.

(ii)

Manner of election. The election shall be made by filing the statement and providing the written notice described in § 1.964-1(c)(3)(ii) and (iii), respectively, at the time and in the manner described therein. For further guidance, see § 1.861-9T(f)(3)(ii).

(f)

(3)

(iii)

-(iv) [Reserved] For further guidance, see § 1.861-9T(f)(3)(iii) and (iv).

(4)

Noncontrolled 10-percent owned foreign corporations.

(i)

In general. For purposes of computing earnings and profits of a noncontrolled 10-percent owned foreign corporations (as defined in section 904(d)(2)(E)) for Federal tax purposes, the interest expense of a noncontrolled 10-percent owned foreign corporations may be apportioned using either the asset method described in § 1.861-9T(g) or the modified gross income method described in § 1.861-9T(j). A noncontrolled 10-percent owned foreign corporations that is not a controlled foreign corporation may elect to use a different method of apportionment than that elected by one or more of its shareholders. A noncontrolled 10-percent owned foreign corporations must use the same method of apportionment with respect to all its domestic corporate shareholders.

(ii)

Manner of election. The election to use the asset method described in § 1.861-9T(g) or the modified gross income method described in § 1.861-9T(j) may be made either by the noncontrolled 10-percent owned foreign corporations or by the majority domestic corporate shareholders (as defined in § 1.964-1(c)(5)(ii)) on behalf of the noncontrolled 10-percent owned foreign corporations. The election shall be made by filing the statement and providing the written notice described in § 1.964-1(c)(3)(ii) and (iii), respectively, at the time and in the manner described therein.

(iii)

Stock characterization. The stock of a noncontrolled 10-percent owned foreign corporation is characterized under the rules in § 1.861-12(c)(4).

(5)

Other relevant provisions. For further guidance, see § 1.861-9T(f)(5).

(g)

Asset method—

(1)

In general.

(i)

For further guidance, see § 1.861-9T(g)(1)(i).

(ii)

A taxpayer may elect to determine the value of its assets on the basis of either the tax book value or the fair market value of its assets. However, for taxable years beginning after December 31, 2017, the fair market value method is not allowed with respect to allocations and apportionments of interest expense. See section 864(e)(2). For rules concerning the application of an alternative method of valuing assets for purposes of the tax book value method, see paragraph (i) of this section. For rules concerning the application of the fair market value method, see paragraph (h) of this section.

(iii)

[Reserved]

(iv)

For rules relating to earnings and profits adjustments by taxpayers using the tax book value method for the stock in certain 10 percent owned corporations, see § 1.861-12(c)(2).

(v)

[Reserved]

(2)

Asset values—

(i)

General rule—

(A)

Average of values. For purposes of determining the value of assets under this section, an average of values (book or market) within each statutory grouping and the residual grouping is computed for the year on the basis of values of assets at the beginning and end of the year. For the first taxable year beginning after December 31, 2017 (post-2017 year), a taxpayer that determined the value of its assets on the basis of the fair market value method for purposes of apportioning interest expense in its prior taxable year may choose to determine asset values under the tax book value method (or the alternative tax book value method) by treating the value of its assets as of the beginning of the post-2017 year as equal to the value of its assets at the end of the first quarter of the post-2017 year, provided that each member of the affiliated group (as defined in § 1.861-11T(d)) determines its asset values on the same basis. Where a substantial distortion of asset values would result from averaging beginning-of-year and end-of-year values, as might be the case in the event of a major corporate acquisition or disposition, the taxpayer must use a different method of asset valuation that more clearly reflects the average value of assets weighted to reflect the time such assets are held by the taxpayer during the taxable year.

(B)

Tax book value method. Under the tax book value method, the value of an asset is determined based on the adjusted basis of the asset. For purposes of determining the value of stock in a 10 percent owned corporation at the beginning and end of the year under the tax book value method, the tax book value is determined without regard to any adjustments under section 961(a) or 1293(d), see § 1.861-12(c)(2)(i)(B)(1), and before the adjustment required by § 1.861-12(c)(2)(i)(A) to the basis of stock in the 10 percent owned corporation. The average of the tax book value of the stock at the beginning and end of the year is then adjusted with respect to earnings and profits as described in § 1.861-12(c)(2)(i).

(ii)

Special rule for qualified business units of domestic corporations with functional currency other than the U.S. dollar—

(A)

Tax book value method. In the case of taxpayers using the tax book value method of apportionment, the following rules apply to determine the value of the assets of a qualified business unit (QBU) (as defined in section 989(a)) of a domestic corporation with a functional currency other than the dollar.

(1) Section 987 QBU. In the case of a section 987 QBU (as defined in § 1.987-1(b)(3)), the tax book value is determined by applying the rules of paragraph (g)(2)(i) of this section and § 1.861-9T(g)(3) to the beginning-of-year and end-of-year owner functional currency amount of assets. The beginning-of-year owner functional currency amount of assets is determined by reference to the owner functional currency amount of assets computed under § 1.987-4(d)(1)(i)(B) and (e) on the last day of the preceding taxable year. The end-of-year owner functional currency amount of assets is determined by reference to the owner functional currency amount of assets computed under § 1.987-4(d)(1)(i)(A) and (e) on the last day of the current taxable year. The beginning-of-year and end-of-year owner functional currency amount of assets, as so determined within each grouping, are then averaged as provided in paragraph (g)(2)(i) of this section.

(2) U.S. dollar approximate separate transactions method. In the case of a branch to which the U.S. dollar approximate separate transactions method of accounting described in § 1.985-3 applies, the beginning-of-year dollar amount of the assets is determined by reference to the end-of-year balance sheet of the branch for the immediately preceding taxable year, adjusted for U.S. generally accepted accounting principles and Federal income tax accounting principles, and translated into U.S. dollars as provided in § 1.985-3(c). The end-of-year dollar amount of the assets of the branch is determined in the same manner by reference to the end-of-year balance sheet for the current taxable year. The beginning-of-year and end-of-year dollar tax book value of assets, as so determined, within each grouping is then averaged as provided in paragraph (g)(2)(i) of this section.

(B)

Fair market value method. In the case of taxpayers using the fair market value method of apportionment, the beginning-of-year and end-of-year fair market values of branch assets within each grouping are computed in dollars and averaged as provided in this paragraph (g)(2) and § 1.861-9T(g)(2).

(iii)

Adjustment for directly allocated interest. For further guidance, see § 1.861-9T(g)(2)(iii).

(iv)

Assets in intercompany transactions. For further guidance, see § 1.861-9T(g)(2)(iv).

(v)

Applicability date. Generally, paragraph (g)(2)(ii)(A)(1) of this section applies to taxable years beginning after December 31, 2024. However, if pursuant to § 1.987-15(b), a taxpayer chooses to apply §§ 1.987-1 through 1.987-15 to a taxable year before the first taxable year described in § 1.987-15(a)(1), then paragraph (g)(2)(ii)(A)(1) of this section applies to that taxable year and subsequent years.

(3)

Characterization of assets. For further guidance, see § 1.861-9T(g)(3). In applying § 1.861-9T(g)(3), for purposes of applying section 904 as the operative section, the statutory or residual grouping of income that assets generate, have generated, or may reasonably be expected to generate is determined after taking into account any reallocation of income required under § 1.904-4(f)(2)(vi).

(4)

Characterization of lower tier entities at the level of a CFC. In the case of a controlled foreign corporation that is applying the asset method, see for example § 1.861-12T(c)(3)(ii) (requiring the application of § 1.861-9T(g) at the level of the controlled foreign corporation) or paragraph (f)(3)(i) of this section, the controlled foreign corporation (and any lower-tier controlled foreign corporations) must characterize stock of a lower-tier 10 percent owned corporation by applying § 1.861-12 and treating the controlled foreign corporation as the relevant taxpayer for such purposes. In the case of a controlled foreign corporation that owns stock in one or more lower-tier corporations, in applying the asset method, the first-tier controlled foreign corporation must take into account the stock in the lower-tier corporations. Therefore, the controlled foreign corporation (and any lower-tier controlled foreign corporations) must make basis adjustments in lower-tier 10 percent owned corporations under § 1.861-12(c)(2) for purposes of valuing and characterizing the assets of such controlled foreign corporation. For purposes of this paragraph (g)(4), the stock of each such lower-tier corporation is characterized by reference to the assets owned during the lower-tier corporation's taxable year that ends during the first-tier controlled foreign corporation's taxable year. The analysis of assets under this paragraph (g)(4) and § 1.861-12 of a controlled foreign corporation that is in a chain of 10 percent owned corporations must begin at the lowest-tier 10 percent owned corporation and proceed up the chain to the first-tier controlled foreign corporation. See also § 1.861-12T(c)(3)(ii).

(h)

Fair market value method. An affiliated group (as defined in § 1.861-11T(d)) or other taxpayer (the taxpayer) that elects to use the fair market value method of apportionment values its assets according to the methodology described in this paragraph (h). Effective for taxable years beginning after December 31, 2017, the fair market value method is not allowed for purposes of apportioning interest expense. See section 864(e)(2). However, a taxpayer may continue to apportion deductions other than interest expense that are properly apportioned based on fair market value according to the methodology described in this paragraph (h). See § 1.861-8(c)(2).

(1)

Determination of values. For further guidance, see § 1.861-9T(h)(1) through (3).

(2)

-(3) [Reserved]

(4)

Valuing related party debt and stock in related persons—

(i)

Related party debt. For purposes of this section, the value of a debt obligation of a related person held by the taxpayer or another person related to the taxpayer equals the amount of the liability of the obligor related person.

(ii)

Stock in related persons. The value of stock in a related person held by the taxpayer or by another person related to the taxpayer equals the sum of the following amounts reduced by the taxpayer's pro rata share of liabilities of such related person:

(A)

The portion of the value of intangible assets of the taxpayer and related persons that is apportioned to such related person under § 1.861-9T(h)(2);

(B)

The taxpayer's pro rata share of tangible assets held by the related person (as determined under § 1.861-9T(h)(1)(ii));

(C)

The taxpayer's pro rata share of debt obligations of any related person held by the related person (as valued under paragraph (h)(4)(i) of this section); and

(D)

The total value of stock in all related persons held by the related person as determined under this paragraph (h)(4).

(iii)

Example—

(A)

Facts. USP, a domestic corporation, wholly owns CFC1 and owns 80% of CFC2, both foreign corporations. The aggregate trading value of USP's stock traded on established securities markets at the end of Year 1 is $700 and the amount of USP's liabilities to unrelated persons at the end of Year 1 is $400. Neither CFC1 nor CFC2 has liabilities to unrelated persons at the end of Year 1. USP owns plant and equipment valued at $500, CFC1 owns plant and equipment valued at $400, and CFC2 owns plant and equipment valued at $250. The value of these assets has been determined using generally accepted valuation techniques, as required by § 1.861-9T(h)(1)(ii). There is an outstanding loan from CFC2 to CFC1 in an amount of $100. There is also an outstanding loan from USP to CFC1 in an amount of $200.

(B)

Valuation of group assets. Pursuant to § 1.861-9T(h)(1)(i), the aggregate value of USP's assets is $1100 (the $700 trading value of USP's stock increased by $400 of USP's liabilities to unrelated persons).

(C)

Valuation of tangible assets. Pursuant to § 1.861-9T(h)(1)(ii), the value of USP's tangible assets and pro rata share of assets held by CFC1 and CFC2 is $1100 (the plant and equipment held directly by USP, valued at $500, plus USP's 100% pro rata share of the plant and equipment held by CFC1 valued at $400 and USP's 80% pro rata share of the plant and equipment held by CFC 2 valued at $200 (80% of $250)).

(D)

Computation of intangible asset value. Pursuant to § 1.861-9T(h)(1)(iii), the value of the intangible assets of USP, CFC1, and CFC2 is $0 (total aggregate group asset value ($1100) determined in paragraph (B) less total tangible asset value ($1100) determined in paragraph (C)). Because the intangible asset value is zero, the provisions of § 1.861-9T(h)(2) and (3) relating to the apportionment and characterization of intangible assets do not apply.

(E)

Valuing related party debt obligations. Pursuant to § 1.861-9(h)(4)(i), the value of the debt obligation of CFC1 held by CFC2 is equal to the amount of the liability, $100. The value of the debt obligation of CFC1 held by USP is equal to the amount of the liability, $200.

(F)

Valuing the stock of CFC1 and CFC2. Pursuant to § 1.861-9(h)(4)(ii), the value of the stock of CFC2 held by USP is $280 (USP's 80% pro rata share of tangible assets of CFC2 included in paragraph (C) ($200) plus USP's 80% pro rata share of the debt obligation of CFC1 held by CFC2 valued in paragraph (E) ($80). The value of the stock of CFC1 held by USP is $100 (USP's 100% pro rata share of tangible assets of CFC1 included in paragraph (C) ($400) less USP's 100% pro rata share of the liabilities of CFC1 to USP and CFC2 ($300)).

(5)

Characterizing stock in related persons. Stock in a related person held by the taxpayer or by another related person shall be characterized on the basis of the fair market value of the taxpayer's pro rata share of assets held by the related person attributed to each statutory grouping and the residual grouping under the stock characterization rules of § 1.861-12T(c)(3)(ii), except that the portion of the value of intangible assets of the taxpayer and related persons that is apportioned to the related person under § 1.861-9T(h)(2) shall be characterized on the basis of the net income before interest expense of the related person within each statutory grouping or residual grouping (excluding income that is passive under § 1.904-4(b)).

(6)

[Reserved]. For further guidance, see § 1.861-9T(h)(6).

(i)

Alternative tax book value method—

(1)

Alternative value for certain tangible property. A taxpayer may elect to determine the tax book value of its tangible property that is depreciated under section 168 (section 168 property) using the rules provided in this paragraph (i)(1) (the alternative tax book value method). The alternative tax book value method applies solely for purposes of apportioning expenses (including the calculation of the alternative minimum tax foreign tax credit pursuant to section 59(a)) under the asset method described in paragraph (g) of this section.

(i)

The tax book value of section 168 property placed in service during or after the first taxable year to which the election to use the alternative tax book value method applies shall be determined as though such property were subject to the alternative depreciation system set forth in section 168(g) (or a successor provision) for the entire period that such property has been in service.

(ii)

In the case of section 168 property placed in service prior to the first taxable year to which the election to use the alternative tax book value method applies, the tax book value of such property shall be determined under the depreciation method, convention, and recovery period provided for under section 168(g) for the first taxable year to which the election applies.

(iii)

If a taxpayer revokes an election to use the alternative tax book value method (the prior election) and later makes another election to use the alternative tax book value method (the subsequent election) that is effective for a taxable year that begins within 3 years of the end of the last taxable year to which the prior election applied, the taxpayer shall determine the tax book value of its section 168 property as though the prior election has remained in effect.

(iv)

The tax book value of section 168 property shall be determined without regard to the election to expense certain depreciable assets under section 179.

(v)

Examples. The provisions of this paragraph (i)(1) are illustrated in the following examples:

(2)

Timing and scope of election.

(i)

Except as provided in this paragraph (i)(2)(i), a taxpayer may elect to use the alternative tax book value method. For the taxpayer's first taxable year beginning after December 31, 2017, the Commissioner's approval is not required to switch from the fair market value method to the alternative tax book value method for purposes of apportioning interest expense. Any election made pursuant to this paragraph (i)(2)(i) shall apply to all members of an affiliated group of corporations as defined in §§ 1.861-11(d) and 1.861-11T(d). Any election made pursuant to this paragraph (i)(2)(i) shall apply to all subsequent taxable years of the taxpayer unless revoked by the taxpayer. Revocation of such an election, other than in conjunction with an election to use the fair market value method, for a taxable year prior to the sixth taxable year for which the election applies requires the consent of the Commissioner.

(ii)

Example. The provisions of this paragraph (i)(2) are illustrated in the following example:

(3)

Certain other adjustments. [Reserved]

(j)

Modified gross income method. For further guidance, see § 1.861-9T(j) introductory text.

(1)

For further guidance, see § 1.861-9T(j)(1).

(2)

For further guidance, see § 1.861-9T(j)(2) introductory text.

(i)

Step 1. For further guidance, see § 1.861-9T(j)(2)(i).

(ii)

Step 2. Moving to the next higher-tier controlled foreign corporation, combine the gross income of such corporation within each grouping with its pro rata share (as determined under principles similar to section 951(a)(2)) of the gross income net of interest expense of all lower-tier controlled foreign corporations held by such higher-tier corporation within the same grouping adjusted as follows:

(A)

Exclude from the gross income of the higher-tier corporation any dividends or other payments received from the lower-tier corporation other than interest income received from the lower-tier corporation;

(B)

Exclude from the gross income net of interest expense of any lower-tier corporation any gross subpart F income, net of interest expense apportioned to such income;

(C)

Then apportion the interest expense of the higher-tier controlled foreign corporation based on the adjusted combined gross income amounts; and

(D)

Repeat paragraphs (j)(2)(ii)(A) through (C) of this section for each next higher-tier controlled foreign corporation in the chain.

(k)

Applicability dates.

(1)

Except as provided in paragraphs (k)(2) and (3) of this section, this section applies to taxable years that both begin after December 31, 2017, and end on or after December 4, 2018.

(2)

Paragraphs (b)(1)(i), (b)(8), and (e)(9) of this section apply to taxable years that end on or after December 16, 2019. For taxable years that both begin after December 31, 2017, and end on or after December 4, 2018, and also end before December 16, 2019, see § 1.861-9T(b)(1)(i) as contained in 26 CFR part 1 revised as of April 1, 2019.

(3)

The last sentence of paragraph (g)(3) of this section applies to taxable years beginning on or after December 28, 2021.

Notes, amendments, and revision history

Amendments

[T.D. 8916, 66 FR 272, Jan. 3, 2001, as amended by T.D. 9120, 69 FR 15675, Mar. 26, 2004; T.D. 9247, 71 FR 4814, Jan. 30, 2006; T.D. 9452, 74 FR 27873, June 11, 2009; T.D. 9456, 74 FR 46346, Sept. 9, 2009; T.D. 9676, 79 FR 41425, July 16, 2014; T.D. 9676, 79 FR 49683, Aug. 22, 2014; T.D. 9882, 84 FR 69064, Dec. 17, 2019; T.D. 9922, 85 FR 72038, Nov. 12, 2020; T.D. 9959, 87 FR 326, Jan. 4, 2022; T.D. 10016, 89 FR 100164, Dec. 11, 2024]

Authority

Authority: 26 U.S.C. 7805, unless otherwise noted. Section 1.1(h)-1 also issued under 26 U.S.C. 1(h); Section 1.21-1 also issued under 26 U.S.C. 21(f); Section 1.21-2 also issued under 26 U.S.C. 21(f); Section 1.21-3 also issued under 26 U.S.C. 21(f); Section 1.21-4 also issued under 26 U.S.C. 21(f); Section 1.25-1T also issued under 26 U.S.C. 25; Section 1.25-2T also issued under 26 U.S.C. 25; Section 1.25-3 also issued under 26 U.S.C. 25; Section 1.25-3T also issued under 26 U.S.C. 25; Section 1.25-4T also issued under 26 U.S.C. 25; Section 1.25-5T also issued under 26 U.S.C. 25; Section 1.25-6T also issued under 26 U.S.C. 25; Section 1.25-7T also issued under 26 U.S.C. 25; Section 1.25-8T also issued under 26 U.S.C. 25; Section 1.25A-1 also issued under section 26 U.S.C. 25A(i); Section 1.25A-2 also issued under section 26 U.S.C. 25A(i); Section 1.25A-3 also issued under section 26 U.S.C. 25A(i); Section 1.25A-4 also issued under section 26 U.S.C. 25A(i); Section 1.25A-5 also issued under section 26 U.S.C. 25A(i); Section 1.25E-1 also issued under 26 U.S.C. 25E. Section 1.25E-2 also issued under 26 U.S.C. 25E. Section 1.25E-3 also issued under 26 U.S.C. 25E, 26 U.S.C. 30D(g)(1) and (g)(10), and 26 U.S.C. 6011. Section 1.28-0 also issued under 26 U.S.C. 28(d)(5); Section 1.28-1 also issued under 26 U.S.C. 28(d)(5); Section 1.30-1 also issued under 26 U.S.C. 30(d)(2); Section 1.30C-3 also issued under 26 U.S.C. 30; Section 1.30D-1 also issued under 26 U.S.C. 30D. Section 1.30D-2 also issued under 26 U.S.C. 30D. Section 1.30D-3 also issued under 26 U.S.C. 30D. Section 1.30D-4 also issued under 26 U.S.C. 30D and 26 U.S.C. 45W(d)(3). Section 1.30D-5 also issued under 26 U.S.C. 30D and 26 U.S.C. 6011. Section 1.30D-6 also issued under 26 U.S.C. 30D. Section 1.36B-1 also issued under 26 U.S.C. 36B(h). Section 1.36B-2 also issued under 26 U.S.C. 36B(h). Section 1.36B-3 also issued under 26 U.S.C. 36B(h). Section 1.36B-4 also issued under 26 U.S.C. 36B(h). Section 1.36B-5 also issued under 26 U.S.C. 36B(h). Section 1.36B-6 also issued under 26 U.S.C. 36B(h). Section 1.41-4 also issued under 26 U.S.C. 41(d)(4)(E). Section 1.41-6 also issued under 26 U.S.C. 41(f)(1) and 1502; Section 1.41-8 also issued under 26 U.S.C. 41(c)(4)(B); Section 1.41-8T also issued under 26 U.S.C. 41(c)(4)(B); Section 1.41-9 also issued under 26 U.S.C. 41(c)(5)(C); Section 1.41-9T also issued under 26 U.S.C. 41(c)(5)(C); Section 1.42-1 also issued under 26 U.S.C. 42(n); Section 1.42-1T also issued under 26 U.S.C. 42(n); Section 1.42-3 also issued under 26 U.S.C. 42(n); Section 1.42-4 also issued under 26 U.S.C. 42(n); Section 1.42-5 also issued under 26 U.S.C. 42(n); Sections 1.42-6, 1.42-8, 1.42-9, 1.42-10, 1.42-11, and 1.42-12, also issued under 26 U.S.C. 42(n); Section 1.42-13 also issued under 26 U.S.C. 42(n); Section 1.42-14 also issued under 26 U.S.C. 42(n); Section 1.42-15 also issued under 26 U.S.C. 42(n); Section 1.42-16 also issued under 26 U.S.C. 42(n); Section 1.42-17 also issued under 26 U.S.C. 42(n); Section 1.42-18 also issued under 26 U.S.C. 42(h)(6)(F) and 42(h)(6)(K); Section 1.42-19 also issued under 26 U.S.C. 42(n); Sections 1.43-0—1.43-7 also issued under section 26 U.S.C. 43; Section 1.45-6 also issued under 26 U.S.C. 45. Section 1.45-7 also issued under 26 U.S.C. 45. Section 1.45-8 also issued under 26 U.S.C. 45. Section 1.45-12 also issued under 26 U.S.C. 45. Section 1.45D-1 also issued under 26 U.S.C. 45D(e)(2) and (i); Section 1.45G-1 also issued under 26 U.S.C. 45G(e)(2); Section 1.45L-3 also issued under 26 U.S.C. 45L. Sections 1.45Q-1, 1.45Q-2, 1.45Q-3, 1.45Q-4, and 1.45Q-5 also issued under 26 U.S.C. 45Q(h). Section 1.45Q-3 also issued under 26 U.S.C. 45Q(f)(2). Section 1.45Q-4 also issued under 26 U.S.C. 45Q(f)(5). Section 1.45Q-5 also issued under 26 U.S.C. 45Q(f)(4). Section 1.45Q-6 also issued under 26 U.S.C. 45Q. Section 1.45U-3 also issued under 26 U.S.C. 45U. Section 1.45V-1 also issued under 26 U.S.C. 45V(c)(1)(B) and 45V(f). Section 1.45V-2 also issued under 26 U.S.C. 45V(c)(1)(B) and 45V(f). Section 1.45V-3 also issued under 26 U.S.C. 45V. Section 1.45V-4 also issued under 26 U.S.C. 45V(c)(1)(B) and 45V(f). Section 1.45V-5 also issued under 26 U.S.C. 45V(c)(1)(B) and 45V(f). Section 1.45V-6 also issued under 26 U.S.C. 45V(c)(1)(B) and 45V(f). Section 1.45X-1 also issued under 26 U.S.C. 45X, 6001, 6417(h) and 6418(h). Section 1.45X-2 also issued under 26 U.S.C. 45X and 1502. Section 1.45X-3 also issued under 26 U.S.C. 6001. Section 1.45X-4 also issued under 26 U.S.C. 6001. Section 1.45Y-1 also issued under 26 U.S.C. 45Y(f). Section 1.45Y-2 also issued under 26 U.S.C. 45Y(f). Section 1.45Y-3 also issued under 26 U.S.C. 45Y(f). Section 1.45Y-4 also issued under 26 U.S.C. 45Y(f). Section 1.45Y-5 also issued under 26 U.S.C. 45Y(b) and (f). Section 1.45Z-3 also issued under 26 U.S.C. 45Z. Section 1.46-5 also issued under 26 U.S.C. 46(d)(6) and 26 U.S.C. 47(a)(3)(C); Section 1.46-6 also issued under 26 U.S.C. 46(f)(7); Section 1.47-1 also issued under 26 U.S.C. 47(a); Section 1.48-9 also issued under 26 U.S.C. 48(a)(3)(D)(i) and (16). Section 1.48-13 also issued under 26 U.S.C. 48(a)(10)(C) and (16). Section 1.48-14 also issued under 26 U.S.C. 48(a)(16). Section 1.48-15 also issued under 26 U.S.C. 48(a)(15) Section 1.48D-6 also issued under 26 U.S.C. 48D(d)(6); Section 1.48D-6T also issued under 26 U.S.C. 48D(d)(2)(E) and (6); Section 1.48(e)-1 issued under 26 U.S.C. 48. Section 1.48E-1 also issued under 26 U.S.C. 48E(i). Section 1.48E-2 also issued under 26 U.S.C. 48E(i). Section 1.48E-3 also issued under 26 U.S.C. 48E(i). Section 1.48E-4 also issued under 26 U.S.C. 48E(i). Section 1.48E-5 also issued under 26 U.S.C. 48E(i). Section 1.48E(h)-1 also issued under 26 U.S.C. 48E(i). Section 1.50-2 also issued under 26 U.S.C. 50(a)(3)(C), and 50(a)(6). Sections 1.50A—1.50B also issued under 85 Stat. 553 (26 U.S.C. 40(b)); Section 1.52-1 also issued under 26 U.S.C. 52(b); Section 1.56(g)-1 also issued under section 7611(g)(3) of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239, 103 Stat. 2373). Section 1.59A-0 also issued under 26 U.S.C. 59A(i). Section 1.59A-1 also issued under 26 U.S.C. 59A(i). Section 1.59A-2 also issued under 26 U.S.C. 59A(i). Section 1.59A-3 also issued under 26 U.S.C. 59A(i). Section 1.59A-4 also issued under 26 U.S.C. 59A(i). Section 1.59A-5 also issued under 26 U.S.C. 59A(i). Section 1.59A-6 also issued under 26 U.S.C. 59A(i). Section 1.59A-7 also issued under 26 U.S.C. 59A(i). Section 1.59A-8 also issued under 26 U.S.C. 59A(i). Section 1.59A-9 also issued under 26 U.S.C. 59A(i). Section 1.59A-10 also issued under 26 U.S.C. 59A(i). Section 1.61-2T also issued under 26 U.S.C. 61. Section 1.61-21 also issued under 26 U.S.C. 61. Sections 1.62-1T and 1.62-2 also issued under 26 U.S.C. 62. Section 1.66-4 also issued under 26 U.S.C. 66(c); Sections 1.67-2T and 1.67-3T also issued under 26 U.S.C. 67(c). Section 1.67-3 also issued under 26 U.S.C. 67(c). Section 1.67-4 also issued under 26 U.S.C. 67(e). Sections 1.72-4, 1.72-5, 1.72-6, 1.72-7, 1.72-8, and 1.72-11 also issued under 26 U.S.C. 72(c). Section 1.78-1 also issued under 26 U.S.C. 245A(g). Section 1.101-7 also issued under 26 U.S.C. 101(d)(2)(B)(ii). Section 1.103-10 also issued under 26 U.S.C. 103(b)(6). Section 1.103A-2 also issued under 26 U.S.C. 103A(j). Section 1.108-1 also issued under 26 U.S.C. 108(e)(8) and 108(e)(10(B). Section 1.108-2 also issued under 26 U.S.C. 108. Section 1.108-3 also issued under 26 U.S.C. 108, 267, and 1502. Section 1.108-4 also issued under 26 U.S.C. 108. Section 1.108-5 also issued under 26 U.S.C. 108. Section 1.108(c)-1 also issued under the authority of 26 U.S.C. 108(d)(9). Section 1.108(i)-0 also issued under 26 U.S.C. 108(i)(7) and 1502. Section 1.108(i)-1 also issued under 26 U.S.C. 108(i)(7) and 1502. Section 1.108(i)-2 also issued under 26 U.S.C. 108(i)(7). Section 1.108(i)-3 also issued under 26 U.S.C. 108(i)(7) and 1502. Section 1.110-1 also issued under 26 U.S.C. 110(d). Sections 1.132-0 through 1.132-8T also issued under 26 U.S.C. 132(o). Section 1.139E-1 also issued under 26 U.S.C. 139E. Section 1.139E-1(d)(6) also issued under 26 U.S.C. 7872. Section 1.139E-2 also issued under 26 U.S.C. 139E. Section 1.148-0 through 1.148-11 also issued under 26 U.S.C. 148(i). Section 1.148-6 also issued under 26 U.S.C. 148 (f), (g), and (i). Section 1.149(b)-1 also issued under 26 U.S.C. 149(b)(3)(B) (v). Section 1.149(d)-1 also issued under 26 U.S.C. 149(d)(7). Section 1.149(e)-1 also issued under 26 U.S.C. 149(e). Section 1.149(g)-1 also issued under 26 U.S.C. 149(g)(5). Section 1.150-4 also issued under 26 U.S.C. 150 (c)(5). Section 1.152-4 also issued under 26 U.S.C. 152(e). Section 1.162-24 also issued under 26 U.S.C. 162(h). Section 1.162(k)-1 is also issued under section 26 U.S.C. 162(k). Section 1.163-8T also issued under 26 U.S.C. 469(k)(4). Section 1.163-9T also issued under 26 U.S.C. 163(h)(3)(D). Section 1.163(j)-1 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502. Section 1.163(j)-2 also issued under 26 U.S.C. 1502. Section 1.163(j)-3 also issued under 26 U.S.C. 1502. Section 1.163(j)-4 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502. Section 1.163(j)-5 also issued under 26 U.S.C. 1502. Section 1.163(j)-6 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502. Section 1.163(j)-7 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502. Section 1.163(j)-8 also issued under 26 U.S.C. 163(j)(8)(B). Section 1.163(j)-9 also issued under 26 U.S.C. 163(j)(7)(B) and (C) and 26 U.S.C. 1502. Section 1.163(j)-10 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502. Section 1.163(j)-11 also issued under 26 U.S.C. 1502. Section 1.165-12 also issued under 26 U.S.C. 165(j)(3). Section 1.166-10 also issued under 26 U.S.C. 166(f). Section 1.168(d)-1 also issued under 26 U.S.C. 168(d)(3). Section 1.168(f)(8)-1T also added under sec. 112(c), Black Lung Benefits Revenue Act of 1981 (Pub. L. 97-119). Section 1.168(h)-1 also issued under 26 U.S.C. 168. Section 1.168(i)-1 also issued under 26 U.S.C. 168(i)(4). Section 1.168(i)-1T also issued under 26 U.S.C. 168(i)(4). Section 1.168(i)-2 also issued under 26 U.S.C. 168. Section 1.168(i)-4 also issued under 26 U.S.C. 168(i)(5). Section 1.168(j)-1T also added under 26 U.S.C. 168(j)(10). Section 1.170A-1 also issued under 26 U.S.C. 170(a). Section 1.170A-6 also issued under 26 U.S.C. 170(f)(4); 26 U.S.C. 642(c)(5). Section 1.170A-12 also issued under 26 U.S.C. 170(f)(4). Section 1.170A-13 also issued under 26 U.S.C. 170(f)(8). Section 1.170A-14 also issued under 26 U.S.C. 170(f)(11) and 170(h)(7). Section 1.170A-15 also issued under 26 U.S.C. 170(a)(1). Section 1.170A-16 also issued under 26 U.S.C. 170(f)(11), 170(f)(19), 170(h)(7)(G), 6001, and 6011. Section 1.170A-17 also issued under 26 U.S.C. 170(a)(1) and 170(f)(11). Section 1.170A-18 also issued under 26 U.S.C. 170(a)(1). Section 1.171-2 also issued under 26 U.S.C. 171(e). Section 1.171-3 also issued under 26 U.S.C. 171(e). Section 1.171-4 also issued under 26 U.S.C. 171(c). Section 1.179-1 also issued under 26 U.S.C. 179(d)(6) and (10). Section 1.179-4 also issued under 26 U.S.C. 179(c). Section 1.179-6 also issued under 26 U.S.C. 179(c). Section 1.179D-3 also issued under 26 U.S.C. 179D. Section 1.197-2 also issued under 26 U.S.C. 197. Section 1.199A-1 also issued under 26 U.S.C. 199A(f)(4). Section 1.199A-2 also issued under 26 U.S.C. 199A(b)(5), (f)(1)(A), (f)(4), and (h). Section 1.199A-3 also issued under 26 U.S.C. 199A(c)(4)(C) and (f)(4). Section 1.199A-4 also issued under 26 U.S.C. 199A(f)(4). Section 1.199A-5 also issued under 26 U.S.C. 199A(f)(4). Section 1.199A-6 also issued under 26 U.S.C. 199A(f)(1)(B) and (f)(4). Section 1.199A-7 also issued under 26 U.S.C. 199A(f)(4) and (g)(6). Section 1.199A-8 also issued under 26 U.S.C. 199A(g)(6). Section 1.199A-9 also issued under 26 U.S.C. 199A(g)(6). Section 1.199A-10 also issued under 26 U.S.C. 199A(g)(6). Section 1.199A-11 also issued under 26 U.S.C. 199A(g)(6). Section 1.199A-12 also issued under 26 U.S.C. 199A(g)(6). Section 1.216-2 also issued under 26 U.S.C. 216(d). Section 1.221-2 also issued under 26 U.S.C. 221(d). Section 1.224-1 also issued under 26 U.S.C. 224(d)(2)(C) and (g) and sec. 70201(h) of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act. Section 1.245A-5 also issued under 26 U.S.C. 245A(g), 951A(a), 954(c)(6)(A), and 965(o). Sections 1.245A-6 through 1.245A-11 also issued under 26 U.S.C. 245A(g), 882(c)(1)(A), 951A, 954(b)(5), 954(c)(6), and 965(o). Section 1.245A(d)-1 also issued under 26 U.S.C. 245A(g). Section 1.245A(e)-1 also issued under 26 U.S.C. 245A(g). Section 1.250-0 also issued under 26 U.S.C. 250(c). Section 1.250-1 also issued under 26 U.S.C. 250(c). Section 1.250(a)-1 also issued under 26 U.S.C. 250(c) and 6001. Section 1.250(b)-1 also issued under 26 U.S.C. 250(c) and 6001. Section 1.250(b)-2 also issued under 26 U.S.C. 250(c). Section 1.250(b)-3 also issued under 26 U.S.C. 250(c). Section 1.250(b)-4 also issued under 26 U.S.C. 250(c). Section 1.250(b)-5 also issued under 26 U.S.C. 250(c). Section 1.250(b)-6 also issued under 26 U.S.C. 250(c). Section 1.263A-1 also issued under 26 U.S.C. 263A(j). Section 1.263A-2 also issued under 26 U.S.C. 263A(j). Section 1.263A-3 also issued under 26 U.S.C. 263A(j). Section 1.263A-4 also issued under 26 U.S.C. 263A. Section 1.263A-4T also issued under 26 U.S.C. 263A. Section 1.263A-5 also issued under 26 U.S.C. 263A. Section 1.263A-6 also issued under 26 U.S.C. 263A. Section 1.263A-7 also issued under 26 U.S.C. 263A(j). Section 1.263A-7T also issued under 26 U.S.C. 263A. Sections 1.263A-8 through 1.263A-15 also issued under 26 U.S.C. 263A(j). Sections 1.267A-1 through 1.267A-7 also issued under 26 U.S.C. 267A(e). Section 1.267(a)-3 also issued under 26 U.S.C. 267(a)(3)(A) and (a)(3)(B)(ii). Section 1.267(f)-1 also issued under 26 U.S.C. 267 and 1502. Section 1.269-3(d) also issued under 26 U.S.C. 382(m). Section 1.274-2 also issued under 26 U.S.C. 274(o). Section 1.274-5 also issued under 26 U.S.C. 274(p). Section 1.274-5T also issued under 26 U.S.C. 274(d). Section 1.274-9 also issued under 26 U.S.C. 274(o). Section 1.274-10 also issued under 26 U.S.C. 274(o). Section 1.274-11 also issued under 26 U.S.C. 274. Section 1.274-12 also issued under 26 U.S.C. 274. Section 1.274-13 also issued under 26 U.S.C. 274. Section 1.274-14 also issued under 26 U.S.C. 274. Section 1.274(d)-1 also issued under 26 U.S.C. 274(d). Section 1.274(d)-1T also issued under 26 U.S.C. 274(d). Section 1.280C-4 also issued under 26 U.S.C. 280C(c)(4). Section 1.280F-1T also issued under 26 U.S.C. 280F. Section 1.280F-6 also issued under 26 U.S.C. 280F. Section 1.280F-7 also issued under 26 U.S.C. 280F(c). Section 1.280G-1 also issued under 26 U.S.C. 280G(b) and (e). Section 1.301-1 also issued under 26 U.S.C. 357(d)(3). Section 1.301-1T also issued under 26 U.S.C. 357(d)(3). Section 1.304-5 also issued under 26 U.S.C. 304. Section 1.304-7 also issued under 26 U.S.C. 304(b)(5)(C). Section 1.305-3 also issued under 26 U.S.C. 305. Section 1.305-5 also issued under 26 U.S.C. 305. Section 1.305-7 also issued under 26 U.S.C. 305. Section 1.332-8 also issued under 26 U.S.C. 332(d)(4). Section 1.334-1 also issued under 26 U.S.C. 367(b). Section 1.336-1 is also issued under 26 U.S.C. 336. Section 1.336-2 is also issued under 26 U.S.C. 336. Section 1.336-3 is also issued under 26 U.S.C. 336. Section 1.336-4 is also issued under 26 U.S.C. 336. Section 1.336-5 is also issued under 26 U.S.C. 336. Section 1.337(d)-1 also issued under 26 U.S.C. 337(d). Section 1.337(d)-2 also issued under 26 U.S.C. 337(d). Section 1.337(d)-3 also issued under 26 U.S.C. 337(d). Section 1.337(d)-4 also issued under 26 U.S.C. 337. Section 1.337(d)-5 also issued under 26 U.S.C. 337. Section 1.337(d)-6 also issued under 26 U.S.C. 337. Section 1.337(d)-7 also issued under 26 U.S.C. 337. Section 1.337(d)-7T also issued under 26 U.S.C. 337(d) and 355(h). Section 1.338-1 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-2 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-3 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-4 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-5 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-6 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-7 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-8 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-9 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-10 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338-11 also issued under 26 U.S.C. 338. Section 1.338-11T also issued under 26 U.S.C. 338. Section 1.338(h)(10)-1 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.338(h)(10)-1T also issued under 26 U.S.C. 337(d), 338 and 1502. Section 1.338(i)-1 also issued under 26 U.S.C. 337(d), 338, and 1502. Section 1.351-1 also issued under 26 U.S.C. 351. Section 1.351-2 also issued under 26 U.S.C. 351(g)(4). Section 1.354-1 also issued under 26 U.S.C. 351(g)(4). Section 1.355-1 also issued under 26 U.S.C. 351(g)(4). Section 1.355-2(g) and (i) also issued under 26 U.S.C. 355(b)(3)(D). Section 1.355-2T(g) and (i) are also issued under 26 U.S.C. 355(b)(3)(D). Section 1.355-6 also issued under 26 U.S.C. 355(d)(9). Section 1.355-7 also issued under 26 U.S.C. 355(e)(5). Section 1.355-8 also issued under 26 U.S.C. 336(e), 355(e)(3)(B), 355(e)(5), and 355(f). Section 1.356-6 also issued under 26 U.S.C. 351(g)(4). Section 1.356-7 also issued under 26 U.S.C. 351(g)(4). Section 1.358-2 also issued under 26 U.S.C. 358(b)(1). Section 1.358-5 also issued under 26 U.S.C. 358(h)(2). Section 1.358-5T also issued under 26 U.S.C. 358(h)(2). Section 1.358-7 also issued under Public Law 106-554, 114 Stat. 2763, 2763A-638 (2001). Section 1.362-3 also issued under 26 U.S.C. 367(b). Section 1.362-4 also issued under 26 U.S.C. 362(e)(2)(C)(ii). Section 1.367(a)-1 also issued under 26 U.S.C. 367(a). Section 1.367(a)-1T also issued under 26 U.S.C. 367(a). Section 1.367(a)-3 also issued under 26 U.S.C. 367(a). Section 1.367(a)-3T also issued under 26 U.S.C. 367(a). Section 1.367(a)-7 also issued under 26 U.S.C. 367(a), (b), (c), and 337(d). Section 1.367(a)-8 also issued under 26 U.S.C. 367(a) and (b). Section 1.367(a)-9T also issued under 26 U.S.C. 367(a) and (b). Section 1.367(b)-0 also issued under 26 U.S.C. 367(b). Section 1.367(b)-1 also issued under 26 U.S.C. 367(a) and (b). Section 1.367(b)-2 also issued under 26 U.S.C. 367(a) and (b). Sections 1.367(b)-2(c)(1) and (2) also issued under 26 U.S.C. 367(b)(1) and (2). Section 1.367(b)-2(d)(3) also issued under 26 U.S.C. 367(b)(1) and (2). Section 1.367(b)-3 also issued under 26 U.S.C. 367(a) and (b). Section 1.367(b)-3T also issued under 26 U.S.C. 367(a) and (b). Section 1.367(b)-4 also issued under 26 U.S.C. 367(a) and (b) and 954(c)(6)(A). Section 1.367(b)-4(b)(1) also issued under 26 U.S.C. 367(b). Section 1.367(b)-4(d) also issued under 26 U.S.C. 367(b)(1) and (2). Section 1.367(b)-6 also issued under 26 U.S.C. 367(b). Section 1.367(b)-7 also issued under 26 U.S.C. 367(a) and (b), 26 U.S.C. 902, and 26 U.S.C. 904. Section 1.367(b)-8 also issued under 26 U.S.C. 367(b). Section 1.367(b)-9 also issued under 26 U.S.C. 367(a) and (b), 26 U.S.C. 902, and 26 U.S.C. 904. Section 1.367(b)-10 also issued under 26 U.S.C. 367(b). Section 1.367(b)-12 also issued under 26 U.S.C. 367(a) and (b). Section 1.367(b)-13 also issued under 26 U.S.C. 367(b). Section 1.367(d)-1 also issued under 26 U.S.C. 367(d). Section 1.367(e)-1 also issued under 26 U.S.C. 367(e)(1). Section 1.367(e)-1(a) also issued under 26 U.S.C. 367(e). Section 1.367(e)-2 also issued under 26 U.S.C. 367(e)(2). Section 1.382-1 also issued under 26 U.S.C. 382(m). Section 1.382-2 also issued under 26 U.S.C. 382(k)(1), (l)(3), (m), and 26 U.S.C. 383. Section 1.382-2T also issued under 26 U.S.C. 382(g)(4)(C), (i), (k)(1) and (6), (l)(3), (m), and 26 U.S.C. 383. Section 1.382-3 also issued under 26 U.S.C. 382(g)(4)(C) and 26 U.S.C. 382(m). Section 1.382-4 also issued under 26 U.S.C. 382(l)(3) and 382(m). Section 1.382-5 also issued under 26 U.S.C. 382(m). Section 1.382-5T also issued under 26 U.S.C. 382(m). Section 1.382-6 also issued under 26 U.S.C. 382(b)(3)(A), 26 U.S.C.(d)(1), 26 U.S.C. 382(m), and 26 U.S.C.383(d). Section 1.382-7 also issued under 26 U.S.C 382(m). Section 1.382-7T also issued under 26 U.S.C. 382(m). Section 1.382-8 also issued under 26 U.S.C. 382(m). Section 1.382-9 also issued under 26 U.S.C. 382(l)(3) and (m). Section 1.382-10 also issued under 26 U.S.C 382(m). Section 1.382-10T is also issued under 26 U.S.C. 382(m). Section 1.382-12 also issued under 26 U.S.C. 382(f) and 26 U.S.C. 382(m). Section 1.383-0 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 383. Section 1.383-1 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 383. Section 1.383-2 also issued under 26 U.S.C. 383. Section 1.385-1 also issued under 26 U.S.C. 385. Section 1.385-3 also issued under 26 U.S.C. 385, 701, 1502, 1504(a)(5)(A), and 7701(l). Section 1.385-4 also issued under 26 U.S.C. 385 and 1502. Section 1.401-12 also issued under 26 U.S.C. 401(d)(1). Section 1.401(a)-1 also issued under 26 U.S.C. 401 Section 1.401(a)(2)-1 also issued under Multiemployer Pension Plan Amendments Act, Public Law 96-364, 410, (94 Stat. 1208, 1308)(1980). Section 1.401(a)(5)-1 also issued under 26 U.S.C. 401(a)(5). Section 1.401(a)(9)-1 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(9)-2 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(9)-3 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(9)-4 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(9)-5 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(9)-6 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(9)-7 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(9)-8 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(9)-9 also issued under 26 U.S.C. 401(a)(9). Section 1.401(a)(17)-1 also issued under 26 U.S.C. 401(a)(17). Sections 1.401(a)(26)-1 through (a)(26)-9 also issued under 26 U.S.C. 401(a)(26). Section 1.401(a)(35)-1 is also issued under 26 U.S.C. 401(a)(35). Section 1.401(a)-21 also issued under 26 U.S.C. 401 and section 104 of the Electronic Signatures in Global and National Commerce Act, Public Law 106-229 (114 Stat. 464). Section 1.401(b)-1 also issued under 26 U.S.C. 401(b). Section 1.401(k)-1 also issued under 26 U.S.C. 401(m)(9). Section 1.401(k)-3 is also issued under 26 U.S.C. 401(m)(9). Section 1.401(l)-0 through 1.401(l)-6 also issued under 26 U.S.C. 401(l). Section 1.402A-1 is also issued under 26 U.S.C. 402A Section 1.403(b)-6 also issued under 26 U.S.C. 403(b)(10). Section 1.404(k)-3 is also issued under sections 26 U.S.C. 162(k) and 404(k)(5)(A). Section 1.408-2 also issued under 26 U.S.C. 408(a) and 26 U.S.C. 408(q). Section 1.408-4 also issued under 26 U.S.C. 408. Section 1.408-8 also issued under 26 U.S.C. 408(a)(6) and (b)(3). Section 1.408-11 also issued under 26 U.S.C. 408. Section 1.408(q)-1 also issued under 26 U.S.C. 408(q). Section 1.408A-1 also issued under 26 U.S.C. 408A. Section 1.408A-2 also issued under 26 U.S.C. 408A. Section 1.408A-3 also issued under 26 U.S.C. 408A. Section 1.408A-4 also issued under 26 U.S.C. 408A. Section 1.408A-5 also issued under 26 U.S.C. 408A. Section 1.408A-6 also issued under 26 U.S.C. 408A. Section 1.408A-7 also issued under 26 U.S.C. 408A. Section 1.408A-8 also issued under 26 U.S.C. 408A. Section 1.408A-9 also issued under 26 U.S.C. 408A. Section 1.409(p)-1 is also issued under 26 U.S.C. 409(p)(7). Section 1.410(b)-2 also issued under 26 U.S.C. 410(b)(6). Section 1.410(b)-3 also issued under 26 U.S.C. 410(b)(6). Section 1.410(b)-4 also issued under 26 U.S.C. 410(b)(6). Section 1.410(b)-5 also issued under 26 U.S.C. 410(b)(6). Section 1.410(b)-6 also issued under 26 U.S.C. 410(b)(6) and section 664 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (Public Law 107-16, 115 Stat. 38). Section 1.410(b)-7 also issued under 26 U.S.C. 410(b)(6). Section 1.410(b)-8 also issued under 26 U.S.C. 410(b)(6). Section 1.410(b)-9 also issued under 26 U.S.C. 410(b)(6). Section 1.410(b)-10 also issued under 26 U.S.C. 410(b)(6). Section 1.411(a)-7 also issued under 26 U.S.C. 411(a)(7)(B)(i). Section 1.411(a)(13)-1 also issued under 26 U.S.C. 411(a)(13). Section 1.411(b)(5)-1 also issued under 26 U.S.C. 411(b)(5). Section 1.411(d)-3 also issued under 26 U.S.C. 411(d)(6) and section 645(b) of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16 (115 Stat. 38). Section 1.411(d)-4 also issued under 26 U.S.C. 411(d)(6). Section 1.411(d)-6 issued under Reorganization Plan No. 4 of 1978, 29 U.S.C. 1001nt. §§ 1.414(c)-1 through 1.414(c)-5 also issued under 26 U.S.C. 414(c). Section 1.414(c)-5 also issued under 26 U.S.C. 414(b), (c), and (o). Section 1.414(q)-1T also issued under 26 U.S.C. 414(q). Sections 1.414(r)-0 through 1.414(r)-7 also issued under 26 U.S.C. 414(r). Section 1.414(r)-8 also issued under 26 U.S.C. 410(b) and 414(r). Section 1.414(r)-9 also issued under 26 U.S.C. 401(a)(26) and 414(r). Section 1.414(r)-10 also issued under 26 U.S.C. 129 and 414(r). Section 1.414(r)-1 also issued under 26 U.S.C. 414(r). Section 1.414(s)-1 also issued under 26 U.S.C. 414(s). Section 1.414(v)-2 also issued under 26 U.S.C. 414(v)(7)(D). Section 1.417(e)-1 also issued under 26 U.S.C. 417(e)(3)(A)(ii)(II). Section 1.417(e)-1T also issued under 26 U.S.C. 417(e)(3)(A)(ii)(II). Section 1.419A(f)(6)-1 also issued under 26 U.S.C. 419A(i). Section 1.420-1 also issued under 26 U.S.C. 420(c)(3)(E). Section 1.430(j) 1 also issued under 26 U.S.C. 430(j)(4)(F). Section 1.441-2T also issued under 26 U.S.C. 441(f). Section 1.441-3T also issued under 26 U.S.C. 441. Section 1.442-2T and 1.442-3T also issued under 26 U.S.C. 422, 706, and 1378. Section 1.444-0T through 1.444-3T and Section 1.444-4 is also issued under 26 U.S.C. 444(g). Section 1.446-1 also issued under 26 U.S.C. 446 and 461(h). Section 1.446-4 also issued under 26 U.S.C. 1502. Section 1.446-6 also issued under 26 U.S.C. 446 and 26 U.S.C. 860G. Section 1.446-7 also issued under 26 U.S.C. 446. Section 1.451-3 also issued under 26 U.S.C. 451(b)(1)(A)(ii), (b)(3)(C) and 461(h). Section 1.451-8 also issued under 26 U.S.C. 451(c)(2)(A), (3), (4)(A)(iii), (4)(b)(vii), and 461(h). Section 1.453-11 also issued under 26 U.S.C. 453(j)(1) and (k). Section 1.453A-3 also issued under 26 U.S.C. 453A. Section 1.458-1 also issued under 26 U.S.C. 458. Section 1.460-1 also issued under 26 U.S.C. 460(h). Section 1.460-2 also issued under 26 U.S.C. 460(h). Section 1.460-3 also issued under 26 U.S.C. 460(h). Section 1.460-4 also issued under 26 U.S.C. 460(h) and 1502. Section 1.460-5 also issued under 26 U.S.C. 460(h). Section 1.460-6 also issued under 26 U.S.C. 460(h). Section 1.461-1 also issued under 26 U.S.C. 461(h). Section 1.461-2 also issued under 26 U.S.C. 461(h). Section 1.461-4 also issued under 26 U.S.C. 461(h). Section 1.461-4(d) also issued under 26 U.S.C. 460 and 26 U.S.C. 461(h). Section 1.461-5 also issued under 26 U.S.C. 461(h). Section 1.461-6 also issued under 26 U.S.C. 461(h). Section 1.465-8 also issued under 26 U.S.C. 465. Section 1.465-20 also issued under 26 U.S.C. 465. Section 1.465-27 also issued under 26 U.S.C. 465(b)(6)(B)(iii). Section 1.466-1 through 1.466-4 also issued under 26 U.S.C. 466. Section 1.467-1 is also issued under 26 U.S.C. 467. Section 1.467-2 is also issued under 26 U.S.C. 467. Section 1.467-3 is also issued under 26 U.S.C. 467. Section 1.467-4 is also issued under 26 U.S.C. 467. Section 1.467-5 is also issued under 26 U.S.C. 467. Section 1.467-6 is also issued under 26 U.S.C. 467. Section 1.467-7 is also issued under 26 U.S.C. 467. Section 1.467-8 is also issued under 26 U.S.C. 467. Section 1.467-9 is also issued under 26 U.S.C. 467. Section 1.468A-5 also issued under 26 U.S.C. 468A(e)(5). Section 1.468A-5T also issued under 26 U.S.C. 468A(e)(5). Section 1.468B-1 also issued under 26 U.S.C. 461(h) and 468B(g). Section 1.468B-2 also issued under 26 U.S.C. 461(h) and 468B(g). Section 1.468B-3 also issued under 26 U.S.C. 461(h) and 468B(g). Section 1.468B-4 also issued under 26 U.S.C. 461(h) and 468B(g). Section 1.468B-5 also issued under 26 U.S.C. 461(h) and 468B(g). Section 1.468B-7 also issued under 26 U.S.C. 461(h) and 468B(g). Section 1.468B-9 also issued under 26 U.S.C. 461(h) and 468B(g). Section 1.469-1 also issued under 26 U.S.C. 469. Section 1.469-1T also issued under 26 U.S.C. 469. Section 1.469-2 also issued under 26 U.S.C. 469(l). Section 1.469-2T also issued under 26 U.S.C. 469(l). Section 1.469-3 also issued under 26 U.S.C. 469(l). Section 1.469-3T also issued under 26 U.S.C. 469(l). Section 1.469-4 also issued under 26 U.S.C. 469(l). Section 1.469-5 also issued under 26 U.S.C. 469(l). Section 1.469-5T also issued under 26 U.S.C. 469(l). Section 1.469-7 also issued under 26 U.S.C. 469(l). Section 1.469-9 also issued under 26 U.S.C. 469(c)(6), (h)(2), and (l)(1). Section 1.469-11 also issued under 26 U.S.C. 469(l). Section 1.471 also issued under 26 U.S.C. 471. Section 1.471-3 also issued under 26 U.S.C. 471(a). Section 1.471-4 also issued under 26 U.S.C. 263A. Section 1.471-5 also issued under 26 U.S.C. 263A. Section 1.471-6 also issued under 26 U.S.C. 471. Section 1.472-8 also issued under 26 U.S.C. 472. Section 1.475(a)-3 also issued under 26 U.S.C. 475(e). Section 1.475(a)-4 also issued under 26 U.S.C. 475(g). Section 1.475(b)-1 also issued under 26 U.S.C. 475(b)(4) and 26 U.S.C. 475(e). Section 1.475(b)-2 also issued under 26 U.S.C. 475(b)(2) and 26 U.S.C. 475(e). Section 1.475(b)-4 also issued under 26 U.S.C. 475(b)(2), 26 U.S.C. 475(e), and 26 U.S.C. 6001. Section 1.475(c)-1 also issued under 26 U.S.C. 475(e). Section 1.475(c)-2 also issued under 26 U.S.C. 475(e) and 26 U.S.C. 860G(e). Section 1.475(d)-1 also issued under 26 U.S.C. 475(e). Section 1.475(e)-1 also issued under 26 U.S.C. 475(e). Section 1.481-1 also issued under 26 U.S.C. 481. Section 1.481-2 also issued under 26 U.S.C. 481. Section 1.481-3 also issued under 26 U.S.C. 481. Section 1.481-4 also issued under 26 U.S.C. 481. Section 1.481-5 also issued under 26 U.S.C. 481. Section 1.481-6 is also issued under 26 U.S.C. 481. Section 1.482-1 also issued under 26 U.S.C. 482 and 936. Sections 1.482-1 and 1.482-1T also issued under 26 U.S.C. 482. Section 1.482-2 also issued under 26 U.S.C. 482. Section 1.482-3 also issued under 26 U.S.C. 482. Section 1.482-4 also issued under 26 U.S.C. 482. Section 1.482-5 also issued under 26 U.S.C. 482. Section 1.482-7 is also issued under 26 U.S.C. 482. Section 1.482-9 also issued under 26 U.S.C. 482. Section 1.482-2A also issued under 26 U.S.C. 482. Section 1.482-7A also issued under 26 U.S.C. 482. Section 1.483-1 through 1.483-3 also issued under 26 U.S.C. 483(f). Section 1.483-4 also issued under 26 U.S.C. 483(f). Section 1.501(c)(29)-1 also issued under 26 U.S.C. 501(c)(29)(B)(i). Section 1.501(c)(29)-1T also issued under 26 U.S.C. 501(c)(29)(B)(i). Sections 1.504-1 and 1.504-2 also issued under 26 U.S.C. 504(b). Section 1.514(c)-2 also issued under 26 U.S.C. 514(c)(9)(E)(iii). Section 1.527-9 also issued under 26 U.S.C. 527(h)(2)(B)(i). Sections 1.529A-0 through 1.529A-8 also issued under 26 U.S.C. 529A(g). Section1.585-5 through 1.585-8 also issued under 26 U.S.C. 585(b)(3). Section1.597-1 through 1.597-7 also issued under 26 U.S.C. 597 and 1502. Section1.597-8 also issued under 26 U.S.C. 597. Section 1.642(c)-6 also issued under 26 U.S.C. 642(c)(5). Section 1.642(h)-2 also issued under 26 U.S.C. 642(h). Section 1.642(h)-5 also issued under 26 U.S.C. 642(h). Section 1.643(a)-8 also issued under 26 U.S.C. 643(a)(7). Section 1.643(f)-1 also issued under 26 U.S.C. 643(f). Section 1.643(h)-1 also issued under 26 U.S.C. 643(a)(7). Section 1.642(c)-6A also issued under 26 U.S.C. 642(c)(5). Section 1.645-1 also issued under 26 U.S.C. 645. Sections 1.663(c)-1, 1.663(c)-2, 1.663(c)-3, 1.663(c)-4, 1.663(c)-5, and 1.663(c)-6 also issued under 26 U.S.C. 663(c). Section 1.664-1 also issued under 26 U.S.C. 664(a). Section 1.664-2 also issued under 26 U.S.C. 664(a). Section 1.664-3 also issued under 26 U.S.C. 664(a). Section 1.664-4 also issued under 26 U.S.C. 664(a). Section 1.664-4A also issued under 26 U.S.C. 664(a). Section 1.671-2 also issued under 26 U.S.C. 643(a)(7) and 672(f)(6). Section 1.672(f)-1 also issued under 26 U.S.C. 643(a)(7) and 672(f)(6). Section 1.672(f)-2 also issued under 26 U.S.C. 643(a)(7) and 672(f)(3) and (6). Section 1.672(f)-3 also issued under 26 U.S.C. 643(a)(7) and 672(f)(2) and (6). Section 1.672(f)-4 also issued under 26 U.S.C. 643(a)(7) and 672(f)(4) and (6). Section 1.672(f)-5 also issued under 26 U.S.C. 643(a)(7) and 672(f)(6). Section 1.679-1 also issued under 26 U.S.C. 643(a)(7) and 679(d). Section 1.679-2 also issued under 26 U.S.C. 643(a)(7) and 679(d). Section 1.679-3 also issued under 26 U.S.C. 643(a)(7) and 679(d). Section 1.679-4 also issued under 26 U.S.C. 643(a)(7), 679(a)(3) and 679(d). Section 1.679-5 also issued under 26 U.S.C. 643(a)(7) and 679(d). Section 1.679-6 also issued under 26 U.S.C. 643(a)(7) and 679(d). Section 1.684-1 also issued under 26 U.S.C. 643(a)(7) and 684(a). Section 1.684-2 also issued under 26 U.S.C. 643(a)(7) and 684(a). Section 1.684-3 also issued under 26 U.S.C. 643(a)(7) and 684(a). Section 1.684-4 also issued under 26 U.S.C. 643(a)(7) and 684(a). Section 1.684-5 also issued under 26 U.S.C. 643(a)(7) and 684(a). Section 1.701-2 also issued under 26 U.S.C. 701 through 761. Section 1.704-3 also issued under 26 U.S.C. 704(c). Section 1.704-4 also issued under 26 U.S.C. 704(c). Section 1.705-2 also issued under 26 U.S.C. 705 and 1032. Section 1.706-1T also issued under 26 U.S.C. 706(b). Section 1.706-3 also issued under 26 U.S.C. 170(h)(7)(G). Section 1.706-3T also issued under 26 U.S.C. 444(f). Section 1.706-4 also issued under 26 U.S.C. 170(h)(7)(G). Sections 1.707-2 through 1.707-9 also issued under 26 U.S.C. 707(a)(2). Section 1.721-1 also issued under 26 U.S.C. 721. Section 1.721(c)-1 also issued under 26 U.S.C. 721(c). Section 1.721(c)-2 also issued under 26 U.S.C. 721(c). Section 1.721(c)-3 also issued under 26 U.S.C. 721(c). Section 1.721(c)-4 also issued under 26 U.S.C. 721(c). Section 1.721(c)-5 also issued under 26 U.S.C. 721(c). Section 1.721(c)-6 also issued under 26 U.S.C. 721(c). Section 1.721(c)-7 also issued under 26 U.S.C. 721(c). Section 1.731-2 also issued under 26 U.S.C. 731(c). Section 1.732-1 also issued under 26 U.S.C. 732. Section 1.732-2 also issued under 26 U.S.C. 732. Section 1.732-3 also issued under 26 U.S.C. 337(d), 732(f)(8), and 1502. Section 1.734-1 also issued under 26 U.S.C. 734. Section 1.743-1 also issued under 26 U.S.C. 743. Section 1.751-1 also issued under 26 U.S.C. 751. Section 1.752-1(a) also issued under Public Law 106-554, 114 Stat. 2763, 2763A-638 (2001). Section 1.752-6 also issued under Public Law 106-554, 114 Stat. 2763, 2763A-638 (2001). Section 1.752-7 also issued under Public Law 106-554, 114 Stat. 2763, 2763A-638 (2001). Section 1.754-1 also issued under 26 U.S.C. 754. Section 1.755-1 also issued under 26 U.S.C. 755. Section 1.755-2 also issued under 26 U.S.C. 755 and 26 U.S.C. 1060. Section 1.761-2 also issued under 26 U.S.C. 446(b), 761(a), 6031(a), 6417(d), and 6417(h). Section 1.807-2 also issued under 26 U.S.C. 817A(e). Section 1.807-3 also issued under 26 U.S.C. 807(e)(6). Section 1.809-10 also issued under 26 U.S.C. 809(b)(2) and (g)(3). Section 1.811-3 also issued under 26 U.S.C. 817A(e). Section 1.812-9 also issued under 26 U.S.C. 817A(e). Section 1.817-5 also issued under 26 U.S.C. 817(h). Section 1.817A-1 also issued under 26 U.S.C. 817A(e). Section 1.832-4 also issued under 26 U.S.C. 832(b)(5)(A). Section 1.846-1 also issued under 26 U.S.C. 846. Section 1.848-2 also issued under 26 U.S.C. 845(b) and 26 U.S.C. 848(d)(4)(B). Section 1.848-3 also issued under 26 U.S.C. 848(d)(4)(B). Sections 1.851-3 and 1.851-5 are also issued under 26 U.S.C. 851(c). Section 1.852-11 is also issued under 26 U.S.C. 852(b)(3)(C), 852(b)(8), and 852(c). Section 1.853-1 also issued under 26 U.S.C. 901(j). Section 1.853-2 also issued under 26 U.S.C. 901(j). Section 1.853-3 also issued under 26 U.S.C. 901(j). Section 1.853-4 also issued under 26 U.S.C. 901(j) and 26 U.S.C. 6011. Section 1.860A-0 also issued under 26 U.S.C. 860G(e). Section 1.860A-1 also issued under 26 U.S.C. 860G(b) and 860G(e). Section 1.860C-2 also issued under 26 U.S.C. 860C(b)(1) and 860G(e). Section 1.860D-1 also issued under 26 U.S.C. 860G(e). Section 1.860E-1 also issued under 26 U.S.C. 860E and 860G(e). Section 1.860E-2 also issued under 26 U.S.C. 860E(e). Section 1.860F-2 also issued under 26 U.S.C. 860G(e). Section 1.860F-4 also issued under 26 U.S.C. 860G(e) and 26 U.S.C. 6230(k). Section 1.860F-4T also issued under 26 U.S.C. 860G(c)(3) and (e). Section 1.860G-1 also issued under 26 U.S.C. 860G(a)(1)(B), (d)(2)(E), and (e). Section 1.860G-2 also issued under 26 U.S.C. 860G(e). Section 1.860G-3 also issued under 26 U.S.C. 860G(b) and 26 U.S.C. 860G(e). Section 1.861-2 also issued under 26 U.S.C. 863(a). Section 1.861-3 also issued under 26 U.S.C. 863(a). Section 1.861-8 also issued under 26 U.S.C. 250(c), 26 U.S.C. 864(e)(7), and 26 U.S.C. 882(c). Section 1.861-8T also issued under 26 U.S.C. 863(a), 864(e), 865(i), and 7701(f). Section 1.861-9 also issued under 26 U.S.C. 861, 863(a), 864(e), 864(e)(7), 865(i), 987, and 989(c), and 7701(f). Section 1.861-9T also issued under 26 U.S.C. 861, 863(a), 864(e), 864(e)(7), 865(i), and 7701(f). Section 1.861-10(e) also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e)(7), 26 U.S.C. 865(i), and 26 U.S.C. 7701(f). Section 1.861-10T also issued under 26 U.S.C. 863(a), 864(e), 865(i), and 7701(f). Section 1.861-11 also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e)(7), 26 U.S.C. 865(i), and 26 U.S.C. 7701(f). Section 1.861-11T also issued under 26 U.S.C. 863(a), 864(e), 865(i), and 7701(f). Section 1.861-12 also issued under 26 U.S.C. 864(e)(7). Section 1.861-12T also issued under 26 U.S.C. 863(a), 864(e), 865(i), and 7701(f). Section 1.861-13 also issued under 26 U.S.C. 864(e)(7). Section 1.861-13T also issued under 26 U.S.C. 863(a), 864(e), 865(i), and 7701(f). Section 1.861-14 also issued under 26 U.S.C. 864(e)(7). Section 1.861-14T also issued under 26 U.S.C. 863(a), 864(e), 865(i), and 7701(f). Section 1.861-17 also issued under 26 U.S.C. 864(e)(7). Section 1.863-1 also issued under 26 U.S.C. 863(a). Section 1.863-2 also issued under 26 U.S.C. 863. Section 1.863-3 also issued under 26 U.S.C. 863(a) and (b), and 26 U.S.C. 936(h). Section 1.863-4 also issued under 26 U.S.C. 863. Section 1.863-6 also issued under 26 U.S.C. 863. Section 1.863-7 also issued under 26 U.S.C. 863(a) and 871(m). Section 1.863-8 also issued under 26 U.S.C. 863(a), (b) and (d). Section 1.863-9 also issued under 26 U.S.C. 863(a), (d) and (e). Section 1.864-5 also issued under 26 U.S.C. 7701(l). Section 1.864-8T also issued under 26 U.S.C. 864(d)(8). Section 1.864(c)(8)-1 also issued under 26 U.S.C. 864(c)(8) and 897(g). Section 1.864(c)(8)-2 also issued under 26 U.S.C. 864(c)(8)(E), 6001 and 6031(b). Section 1.865-1 also issued under 26 U.S.C. 863(a) and 865(j)(1). Section 1.865-2 also issued under 26 U.S.C. 863(a) and 865(j)(1). Section 1.865-3 also issued under 26 U.S.C. 865(j). Section 1.871-1 also issued under 26 U.S.C. 7701(l). Section 1.871-7 also issued under 26 U.S.C. 7701(l). Section 1.871-9 also issued under 26 U.S.C. 7701(b)(11). Sections 1.871-15 and 1.871-15T also issued under 26 U.S.C. 871(m). Section 1.874-1 also issued under 26 U.S.C. 874. Section 1.881-2 also issued under 26 U.S.C. 7701(l). Section 1.881-3 also issued under 26 U.S.C. 7701(l). Section 1.881-4 also issued under 26 U.S.C. 7701(l). Section 1.882-4 also issued under 26 U.S.C. 882(c). Section 1.882-5 also issued under 26 U.S.C. 882(c), 26 U.S.C. 864(e), 26 U.S.C. 988(d), and 26 U.S.C. 7701(l). Section 1.883-1 is also issued under 26 U.S.C. 883. Section 1.883-2 is also issued under 26 U.S.C. 883. Section 1.883-3 is also issued under 26 U.S.C. 883. Section 1.883-4 is also issued under 26 U.S.C. 883. Section 1.883-5 is also issued under 26 U.S.C. 883. Section 1.884-0 also issued under 26 U.S.C. 884 (g). Section 1.884-1 also issued under 26 U.S.C. 884. Section 1.884-1 also issued under 26 U.S.C. 884 (g). Section 1.884-1 (d) also issued under 26 U.S.C. 884 (c) (2) (A). Section 1.884-1 (d) (13) (i) also issued under 26 U.S.C. 884 (c) (2). Section 1.884-1 (e) also issued under 26 U.S.C. 884 (c) (2) (B). Section 1.884-2 also issued under 26 U.S.C. 884(g). Section 1.884-2T also issued under 26 U.S.C. 884 (g). Section 1.884-4 also issued under 26 U.S.C. 884 (g). Section 1.884-5 also issued under 26 U.S.C. 884 (g). Section 1.884-5 (e) and (f) also issued under 26 U.S.C. 884 (e) (4) (C). Section 1.892-1T also issued under 26 U.S.C. 892(c). Section 1.892-2T also issued under 26 U.S.C. 892(c). Section 1.892-3 also issued under 26 U.S.C. 892(c). Section 1.892-3T also issued under 26 U.S.C. 892(c). Section 1.892-4 also issued under 26 U.S.C. 892(c). Section 1.892-4T also issued under 26 U.S.C. 892(c). Section 1.892-5 also issued under 26 U.S.C. 892(c). Section 1.892-5T also issued under 26 U.S.C. 892(c). Section 1.892-6T also issued under 26 U.S.C. 892(c). Section 1.892-7T also issued under 26 U.S.C. 892(c). Section 1.894-1 also issued under 26 U.S.C. 894 and 7701(l). Section 1.897-1 also issued under 26 U.S.C. 897 and 897(l)(3). Section 1.897-2 also issued under 26 U.S.C. 897. Sections 1.897-5T, 1.897-6T and 1.897-7T also issued under 26 U.S.C. 897 (d), (e), (g) and (j) and 26 U.S.C. 367(e)(2). Section 1.897-7 also issued under 26 U.S.C. 897(g). Section 1.897(l)-1 also issued under 26 U.S.C. 897(l). Section 1.901(j)-1 also issued under 26 U.S.C. 901(j)(4). Sections 1.901(m)-1 through 1.901-8 also issued under 26 U.S.C. 901(m)(7). Section 1.901(m)-5 also issued under 26 U.S.C. 901(m)(3)(B)(ii). Sections 1.902-1 and 902-2 also issued under 26 U.S.C. 902(c)(7). Section 1.904-1 also issued under 26 U.S.C. 904(d)(7). Section 1.904-2 also issued under 26 U.S.C. 904(d)(7). Section 1.904-3 also issued under 26 U.S.C. 904(d)(7). Section 1.904-4 also issued under 26 U.S.C. 250(c), 26 U.S.C. 865(j), 26. U.S.C. 904(d)(2)(J)(i), 26 U.S.C. 904(d)(6)(C), 26 U.S.C. 904(d)(7), and 26 U.S.C. 951A(f)(1)(B). Section 1.904-5 also issued under 26 U.S.C. 904(d)(7) and 26 U.S.C. 951A(f)(1)(B). Section 1.904-6 also issued under 26 U.S.C. 904(d)(7). Section 1.904-7 also issued under 26 U.S.C. 904(d)(6). Section 1.904(b)-1 also issued under 26 U.S.C. 1(h)(11)(C)(iv) and 904(b)(2)(C). Section 1.904(b)-2 also issued under 26 U.S.C. 1(h)(11)(C)(iv) and 904(b)(2)(C). Section 1.904(f)-(2) also issued under 26 U.S.C. 904 (f)(3)(b). Section 1.904(g)-3 also issued under 26 U.S.C. 904(g)(4). Section 1.904(g)-3T also issued under 26 U.S.C. 904(g)(4). Section 1.904(i)-1 also issued under 26 U.S.C. 904(i). Section 1.905-3 also issued under 26 U.S.C. 989(c)(4). Sections 1.905-3T and 1.905-4T also issued under 26 U.S.C. 989(c)(4). Section 1.905-4 also issued under 26 U.S.C. 989(c)(4), 26 U.S.C. 6227(d), 26 U.S.C. 6241(11), and 26 U.S.C. 6689(a). Section 1.907(b)-1 is also issued under 26 U.S.C. 907(b). Section 1.907(b)-1T also issued under 26 U.S.C. 907(b). Sections 1.909-1 through 1.906-6 also issued under 26 U.S.C. 909(e). Section 1.911-7 also issued under 26 U.S.C. 911(d)(9). Section 1.931-1 also issued under 26 U.S.C. 7654(e). Section 1.932-1 also issued under 26 U.S.C. 7654(e). Section 1.934-1 also issued under 26 U.S.C. 934(b)(4). Section 1.935-1 also issued under 26 U.S.C. 7654(e). Section 1.936-4 also issued under 26 U.S.C. 936(h). Section 1.936-5 also issued under 26 U.S.C. 936(h). Section 1.936-6 also issued under 26 U.S.C. 863(a) and (b), and 26 U.S.C. 936(h). Section 1.936-7 also issued under 26 U.S.C. 936(h). Section 1.936-11 also issued under 26 U.S.C. 936(j). Section 1.937-1 also issued under 26 U.S.C. 937(a). Section 1.937-1T also issued under 26 U.S.C. 937(a). Section 1.937-2 also issued under 26 U.S.C. 937(b). Section 1.937-3 also issued under 26 U.S.C. 937(b). Section 1.951-1 also issued under 26 U.S.C. 7701(a). Section 1.951A-2 also issued under 26 U.S.C. 882(c)(1)(A) and 954(b)(5). Section 1.951A-3 also issued under 26 U.S.C. 951A(d)(4). Section 1.951A-5 also issued under 26 U.S.C. 951A(f)(1)(B). Section 1.952-11T is also issued under 26 U.S.C. 852(b)(3)(C), 852(b)(8), and 852(c). Section 1.953-2 also issued under 26 U.S.C. 7701(b)(11). Section 1.954-0 also issued under 26 U.S.C. 954 (b) and (c). Section 1.954-1 also issued under 26 U.S.C. 954 (b) and (c). Section 1.954-2 also issued under 26 U.S.C. 954 (b) and (c). Section 1.956-1 also issued under 26 U.S.C. 245A(g), 956(d), and 956(e). Section 1.956-1T also issued under 26 U.S.C. 956(d) and 956(e). Section 1.956-2 also issued under 26 U.S.C. 956(d) and 956(e). Section 1.956-3 also issued under 26 U.S.C. 864(d)(8) and 956(e). Section 1.956-4 also issued under 26 U.S.C. 956(d) and 956(e). Section 1.957-1 also issued under 26 U.S.C. 957. Section 1.957-3 also issued under 26 U.S.C. 957(c). Section 1.960-1 also issued under 26 U.S.C. 960(f). Section 1.960-2 also issued under 26 U.S.C. 960(f). Section 1.960-3 also issued under 26 U.S.C. 960(f). Section 1.960-4 also issued under 26 U.S.C. 951A(f)(1)(B) and 26 U.S.C. 960(f). Section 1.962-1 also issued under 26 U.S.C. 965(o). Section 1.965-1 also issued under 26 U.S.C. 965(c)(3)(B)(iii)(V), 965(d)(2), 965(o), 989(c), and 7701(a). Section 1.965-2 also issued under 26 U.S.C. 965(b)(3)(A)(ii), 965(o), and 961(a) and (b). Section 1.965-3 also issued under 26 U.S.C. 965(c)(3)(D) and 965(o). Section 1.965-4 also issued under 26 U.S.C. 965(c)(3)(F) and 965(o). Sections 1.965-5 through 1.965-6 also issued under 26 U.S.C. 965(o) and 26 U.S.C. 902(c)(8) (as in effect on December 21, 2017). Section 1.965-7 also issued under 26 U.S.C. 965(h)(3), 965(h)(5), 965(i)(2), 965(i)(8)(B), 965(m)(2)(A), 965(n)(3), and 965(o). Section 1.965-8 also issued under 26 U.S.C. 965(o). Section 1.965-9 also issued under 26 U.S.C. 965(o). Section 1.985-0 also issued under 26 U.S.C. 985. Section 1.985-1 also issued under 26 U.S.C. 985. Section 1.985-2 also issued under 26 U.S.C. 985. Section 1.985-3 also issued under 26 U.S.C. 985. Section 1.985-4 also issued under 26 U.S.C. 985. Section 1.985-5 also issued under 26 U.S.C. 985, 987, and 989. Section 1.986(a)-1 also issued under 26 U.S.C. 986(a)(1)(C) and 26 U.S.C. 986(a)(1)(D)(ii). Section 1.986(c)-1 also issued under 26 U.S.C. 965(o) and 26 U.S.C. 989(c). Section 1.987-1 also issued under 26 U.S.C. 987, 989, and 1502. Section 1.987-2 also issued under 26 U.S.C. 987, 989, and 1502. Section 1.987-3 also issued under 26 U.S.C. 987 and 989. Section 1.987-4 also issued under 26 U.S.C. 987 and 989. Section 1.987-5 also issued under 26 U.S.C. 987 and 989. Section 1.987-6 also issued under 26 U.S.C. 904, 987, and 989. Section 1.987-7 also issued under 26 U.S.C. 987 and 989. Section 1.987-8 also issued under 26 U.S.C. 987 and 989. Section 1.987-9 also issued under 26 U.S.C. 987, 989, and 6001. Section 1.987-10 also issued under 26 U.S.C. 987, 989, and 6001. Section 1.987-11 also issued under 26 U.S.C. 987, 989, and 1502. Section 1.987-12 also issued under 26 U.S.C. 987 and 989. Section 1.987-13 also issued under 26 U.S.C. 987 and 989. Section 1.987-14 also issued under 26 U.S.C. 987 and 989. Section 1.987-15 also issued under 26 U.S.C. 987 and 989. Section 1.988-0 also issued under 26 U.S.C. 988. Section 1.988-1 also issued under 26 U.S.C. 988 and 989. Section 1.988-2 also issued under 26 U.S.C. 988. Section 1.988-3 also issued under 26 U.S.C. 988. Section 1.988-4 also issued under 26 U.S.C. 988 and 989. Section 1.988-5 also issued under 26 U.S.C. 988. Sections 1.989(a)-0T and 1.989(a)-1T also issued under 26 U.S.C. 989(c). Section 1.989(a)-1 also issued under 26 U.S.C. 989. Section 1.989(b)-1 also issued under 26 U.S.C. 989(b). Section 1.989-1(c) also issued under 26 U.S.C. 989(c). Section 1.1001-6 also issued under 26 U.S.C. 148(i), 26 U.S.C. 988(d), 26 U.S.C. 1275(d), and 26 U.S.C. 7701(l). Section 1.1014-1 also issued under 26 U.S.C. 1014(f). Section 1.1014-2 also issued under 26 U.S.C. 1014(f). Section 1.1014-10 also issued under 26 U.S.C. 1014(f). Section 1.1036-1 also issued under 26 U.S.C. 351(g)(4). Section 1.1059(e)-1 also issued under 26 U.S.C. 1059 (e)(1) and (e)(2). Section 1.1060-1 also issued under 26 U.S.C. 1060. Section 1.1061-0 added under 26 U.S.C. 1061(f). Section 1.1061-1 added under 26 U.S.C. 1061(f). Section 1.1061-2 added under 26 U.S.C. 1061(f). Section 1.1061-3 added under 26 U.S.C. 1(h)(9) and 1061(f). Section 1.1061-4 added under 26 U.S.C. 1061(f). Section 1.1061-5 added under 26 U.S.C. 1061(f). Section 1.1061-6 added under 26 U.S.C. 1061(f). Sections 1.1092(b)-1T and 1.1092(b)-2T also issued under 26 U.S.C. 1092 (b)(1). Section 1.1092(b)-4T also issued under 26 U.S.C. 1092(b)(2). Section 1.1092(b)-6 also issued under 26 U.S.C. 1092(b)(1). Section 1.1092(b)-6 also issued under 26 U.S.C. 1092(b)(2). Section 1.1092(c)-1 also issued under 26 U.S.C. 1092(c)(4)(H). Section 1.1092(c)-2 also issued under 26 U.S.C. 1092(c)(4)(H). Section 1.1092(c)-3 also issued under 26 U.S.C. 1092(c)(4)(H). Section 1.1092(c)-4 also issued under 26 U.S.C. 1092(c)(4)(H). Section 1.1092(d)-1 also issued under 26 U.S.C. 1092(b)(1). Section 1.1092(d)-2 also issued under 26 U.S.C. 1092(d)(3)(B). Section 1.1202-2 is also issued under 26 U.S.C. 1202(k). Section 1.1221-2 also issued under 26 U.S.C. 1221(b)(2)(A)(iii), (b)(2)(B), and (b)(3); 1502 and 6001. Section 1.1244(e)-1 also issued under 26 U.S.C. 1244(e). Section 1.1248-8 also issued under 26 U.S.C. 1248(a) and (c)(1) and (2). Section 1.1254-1 also issued under 26 U.S.C. 1254(b). Section 1.1254-2 also issued under 26 U.S.C. 1254(b). Section 1.1254-3 also issued under 26 U.S.C. 1254(b). Section 1.1254-4 also issued under 26 U.S.C. 1254(b). Section 1.1254-5 also issued under 26 U.S.C. 1254(b). Section 1.1254-6 also issued under 26 U.S.C. 1254(b). Section 1.1271-1 also issued under 26 U.S.C. 1275(d). Section 1.1272-1 also issued under 26 U.S.C. 1275(d). Section 1.1272-2 also issued under 26 U.S.C. 1275(d). Section 1.1272-3 also issued under 26 U.S.C. 1275(d). Section 1.1273-1 also issued under 26 U.S.C. 1275(d). Section 1.1273-2 also issued under 26 U.S.C. 1275(d). Section 1.1274-1 also issued under 26 U.S.C. 1275(d). Section 1.1274-2 also issued under 26 U.S.C. 1275(d). Section 1.1274-3 also issued under 26 U.S.C. 1275(d). Section 1.1274-4 also issued under 26 U.S.C. 1275(d). Section 1.1274-5 also issued under 26 U.S.C. 1275(d). Section 1.1274A-1 also issued under 26 U.S.C. 1274A(e) and 26 U.S.C. 1275(d). Section 1.1275-1 also issued under 26 U.S.C. 1275(d). Section 1.1275-2 also issued under 26 U.S.C. 1275(d). Section 1.1275-3 also issued under 26 U.S.C. 1275(d). Section 1.1275-4 also issued under 26 U.S.C. 1275(d). Section 1.1275-5 also issued under 26 U.S.C. 1275(d). Section 1.1275-6 also issued under 26 U.S.C. 1275(d). Section 1.1275-7 also issued under 26 U.S.C. 1275(d). Section 1.1286-1 also issued under 26 U.S.C. 1275(D) and 1286(f). Section 1.1286-2 also issued under 26 U.S.C. 1286(f). Section 1.1287-1 also issued under 26 U.S.C. 165 (j)(3). Section 1.1291-1 also issued under 26 U.S.C. 1291. Section 1.1291-1 also issued under 26 U.S.C. 1298(a) and (g). Section 1.1291-9, also issued under 26 U.S.C. 1298(a) and (g). Section 1.1298-1 also issued under 26 U.S.C. 1298(f). Section 1.1291-9 also issued under 26 U.S.C. 1291(d)(2). Section 1.1291-10 also issued under 26 U.S.C. 1291(d)(2). Section 1.1293-1 also issued under 26 U.S.C. 1293. Section 1.1294-1T also issued under 26 U.S.C. 1294. Section 1.1295-1 also issued under 26 U.S.C. 1295. Section 1.1295-3 also issued under 26 U.S.C. 1295. Section 1.1296-1 also issued under 26 U.S.C. 1296(g) and 26 U.S.C. 1298(f). Section 1.1296(e)-1 also issued under 26 U.S.C. 1296(e). Section 1.1297-1 also issued under 26 U.S.C. 1298(g). Section 1.1297-2 also issued under 26 U.S.C. 1298(g). Section 1.1297-3T also issued under 26 U.S.C. 1297(b)(1). Section 1.1297-4 also issued under 26 U.S.C. 1297(b)(2)(B) and 1298(g). Section 1.1297-5 also issued under 26 U.S.C. 1297(b)(2)(B) and 1298(g). Section 1.1297-6 also issued under 26 U.S.C. 1297(b)(2)(B) and 1298(g). Section 1.1298-1T also issued under 26 U.S.C. 1298(f) and (g). Section 1.1298-2 also issued under 26 U.S.C. 1298(b)(3) and (g). Section 1.1298-4 also issued under 26 U.S.C. 1298(g). Section 1.1301-1 also issued under 26 U.S.C. 1301(c). Section 1.1301-1T also issued under 26 U.S.C. 1301(c). Section 1.1361-1(j) (6), (10) and (11) also issued under 26 U.S.C. 1361(d)(2)(B)(iii). Section 1.1361-1(l) also issued under 26 U.S.C. 1361(c)(5)(C). Sections 1.1362-1, 1.1362-2, 1.1362-3, 1.1362-4, 1.1362-5, 1.1362-6, 1.1362-7, and 1.1363-1 also issued under 26 U.S.C. 1377. Section 1.1363-2 also issued under 26 U.S.C. 337(d). Section 1.1368-1(f) and (g) also issued under 26 U.S.C. 1377(c). Section 1.1368-2(b) also issued under 26 U.S.C. 1368(c). Section 1.1374-1 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-2 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-3 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-4 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-5 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-6 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-7 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-8 also issued under 26 U.S.C. 337(d) and 1374(e). Section 1.1374-8 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-8T also issued under 26 U.S.C. 337(d) and 1374(e). Section 1.1374-9 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-10 also issued under 26 U.S.C. 337(d) and 1374(e). Section 1.1374-10 also issued under 26 U.S.C. 1374(e) and 337(d). Section 1.1374-10T also issued under 26 U.S.C. 337(d) and 1374(e). Section 1.1377-1 also issued under 26 U.S.C. 1377(a)(2) and (c). Section 1.1394-1 also issued under 26 U.S.C. 1397D. Section 1.1396-1 also issued under 26 U.S.C. 1397D. Section 1.1397E-1 also issued under 26 U.S.C. 1397E. Section 1.1400Z2(a)-1 also issued under 26 U.S.C. 1400Z-2(e)(4). Section 1.1400Z2(b)-1 also issued under 26 U.S.C. 1400Z-2(e)(4). Section 1.1400Z2(c)-1 also issued under 26 U.S.C. 1400Z-2(e)(4). Section 1.1400Z2(d)-1 also issued under 26 U.S.C. 1400Z-2(e)(4). Section 1.1400Z2(d)-2 also issued under 26 U.S.C. 1400Z-2(e)(4). Section 1.1400Z2(f)-1 also issued under 26 U.S.C. 1400Z-2(e)(4). Section 1.1402 (e)-5T also is issued under 26 U.S.C. 1402(e)(1) and (2). Section 1.1411-10 also issued under 26 U.S.C. 367. Section 1.1441-2 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6). Section 1.1441-3 also issued under 26 U.S.C. 1441(c)(4), 26 U.S.C. 3401(a)(6) and 26 U.S.C. 7701(l). Section 1.1441-4 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6). Section 1.1441-5 also issued under 26 U.S.C. 1441(c)(4), 26 U.S.C. 3401(a)(6) and 26 U.S.C. 7701(b)(11). Section 1.1441-6 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6). Section 1.1441-7 also issued under 26 U.S.C. 1441(c)(4), 26 U.S.C. 3401(a)(6) and 26 U.S.C. 7701(l). Section 1.1443-1 also issued under 26 U.S.C. 1443(a). Section 1.1445-2 also issued under 26 U.S.C. 1445. Section 1.1445-5 also issued under 26 U.S.C. 1445(e)(7). Section 1.1445-8 also issued under 26 U.S.C. 1445(e)(7). Section 1.1446-3 also issued under 26 U.S.C. 1446(g). Section 1.1446-4 also issued under 26 U.S.C. 1446(g). Section 1.1446(f)-1 also issued under 26 U.S.C. 1446(f)(6) and 1446(g). Section 1.1446(f)-2 also issued under 26 U.S.C. 1446(f)(6) and 1446(g). Section 1.1446(f)-3 also issued under 26 U.S.C. 1446(f)(6) and 1446(g). Section 1.1446(f)-4 also issued under 26 U.S.C. 1446(f)(6) and 1446(g). Section 1.1446(f)-5 also issued under 26 U.S.C. 1446(f)(6) and 1446(g). Section 1.1461-1 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6). Section 1.1461-2 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6). Section 1.1462-1 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6). Section 1.1471-1 is also issued under 26 U.S.C. 1471 Section 1.1471-2 is also issued under 26 U.S.C. 1471 Section 1.1471-3 is also issued under 26 U.S.C. 1471 Section 1.1471-4 is also issued under 26 U.S.C. 1471 Section 1.1471-5 is also issued under 26 U.S.C. 1471 Section 1.1471-6 is also issued under 26 U.S.C. 1471 Section 1.1472-1 is also issued under 26 U.S.C. 1472 Section 1.1473-1 is also issued under 26 U.S.C. 1473 Section 1.1474-1 is also issued under 26 U.S.C. 1474 Section 1.1474-2 is also issued under 26 U.S.C. 1474 Section 1.1474-3 is also issued under 26 U.S.C. 1474 Section 1.1474-4 is also issued under 26 U.S.C. 1474 Section 1.1474-5 is also issued under 26 U.S.C. 1474 Section 1.1474-6 is also issued under 26 U.S.C. 1474 Section 1.1474-7 is also issued under 26 U.S.C. 1474 Section 1.1502-0 also issued under 26 U.S.C. 1502. Section 1.1502-1 also issued under 26 U.S.C. 1502. Section 1.1502-2 also issued under 26 U.S.C. 1502. Section 1.1502-3 also issued under 26 U.S.C. 1502. Section 1.1502-4 also issued under 26 U.S.C. 1502. Section 1.1502-9 also issued under 26 U.S.C. 1502. Section 1.1502-11 also issued under 26 U.S.C. 1502. Section 1.1502-12 also issued under 26 U.S.C. 250(c) and 1502. Section 1.1502-13 also issued under 26 U.S.C. 250(c), 987, 989, and 1502. Section 1.1502-14Z also issued under 26 U.S.C. 1400Z-2(e)(4) and 1502. Section 1.1502-15 also issued under 26 U.S.C. 1502. Section 1.1502-17 also issued under 26 U.S.C. 446 and 1502. Section 1.1502-18 also issued under 26 U.S.C. 1502. Section 1.1502-19 also issued under 26 U.S.C. 301, 1502, and 1503. Section 1.1502-20 also issued under 26 U.S.C. 337(d) and 1502. Section 1.1502-20T also issued under 26 U.S.C. 337(d) and 1502. Section 1.1502-21 also issued under 26 U.S.C. 1502 and 6402(i). Section 1.1502-21(b)(1) and (b)(3)(v) also issued under 26 U.S.C. 1502. Section 1.1502-21T also issued under 26 U.S.C. 1502. Section 1.1502-21T(b)(1) and (b)(3)(v) also issued under 26 U.S.C. 1502. Section 1.1502-22 also issued under 26 U.S.C. 1502. Section 1.1502-23 also issued under 26 U.S.C. 1502. Section 1.1502-26 also issued under 26 U.S.C. 1502. Section 1.1502-28 also issued under 26 U.S.C. 1502. Section 1.1502-30 also issued under 26 U.S.C. 1502. Section 1.1502-31 also issued under 26 U.S.C. 1502. Section 1.1502-32 also issued under 26 U.S.C. 301, 1502, and 1503. Section 1.1502-32 also issued under 26 U.S.C. 1502. Section 1.1502-32(a)(2), (b)(3)(iii)(C), (b)(3)(iii)(D), and (b)(4)(vi) also issued under 26 U.S.C. 1502. Section 1.1502-32T also issued under 26 U.S.C. 1502. Section 1.1502-33 also issued under 26 U.S.C. 1502. Section 1.1502-34 also issued under 26 U.S.C. 1502. Section 1.1502-35 also issued under 26 U.S.C. 1502. Section 1.1502-35T also issued under 26 U.S.C. 1502. Section 1.1502-36 also issued under 26 U.S.C. 1502. Section 1.1502-36 also issued under 26 U.S.C. 337(d). Section 1.1502-43 also issued under 26 U.S.C. 1502. Section 1.1502-47 also issued under 26 U.S.C. 1502, 1503(c) and 1504(c). Section 1.1502-50 also issued under 26 U.S.C. 250(c) and 1502. Section 1.1502-51 also issued under 26 U.S.C. 1502. Section 1.1502-55 also issued under 26 U.S.C. 1502. Section 1.1502-59A also issued under 26 U.S.C. 1502. Section 1.1502-68 also issued under 26 U.S.C. 1502. Section 1.1502-75 also issued under 26 U.S.C. 1502. Section 1.1502-76 also issued under 26 U.S.C. 1502. Section 1.1502-77 also issued under 26 U.S.C. 1502 and 6402(j). Section 1.1502-78 also issued under 26 U.S.C. 1502, 6402(j), and 6411(c). Section 1.1502-79 also issued under 26 U.S.C. 1502. Section 1.1502-80 also issued under 26 U.S.C. 1502. Section 1.1502-81T also issued under 26 U.S.C. 1502. Section 1.1502-90 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-91 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-92 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-93 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-94 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-95 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-96 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-98 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-99 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502. Section 1.1502-100 also issued under 26 U.S.C. 1502. Sections 1.1503(d)-1 through 8 also issued under 26 U.S.C. 953(d), 1502, 1503(d) and (d)(2)(B), (d)(3), and (d)(4), and 7701. Section 1.1503-2T also issued under 26 U.S.C. 1503(d). Section 1.1504-3 also issued under 26 U.S.C. 1400Z-2(e)(4) and 1504(a)(5). Section 1.1504-4 also issued under 26 U.S.C. 1504(a)(5). Section 1.1502-77A also issued under 26 U.S.C. 1502 and 6402(j). Section 1.1502-77B also issued under 26 U.S.C. 1502 and 6402(j). Section 1.1561-2 also issued under 26 U.S.C. 1561. Section 1.5000A-3 also issued under 26 U.S.C. 5000A(e)(4). Section 1.5000C-1 is also issued under 26 U.S.C. 5000C Section 1.5000C-2 is also issued under 26 U.S.C. 5000C Section 1.5000C-3 is also issued under 26 U.S.C. 5000C Section 1.5000C-4 is also issued under 26 U.S.C. 5000C Section 1.5000C-5 is also issued under 26 U.S.C. 5000C Section 1.5000C-6 is also issued under 26 U.S.C. 5000C Section 1.6011-4T also issued under 26 U.S.C. 6001 and 6011(a). Section 1.6011-4T also issued under 26 U.S.C. 6011. Section 1.6011-6 also issued under 26 U.S.C. 6011(a). Section 1.6011-7 also issued under 26 U.S.C. 6011(e). Section 1.6011-9 also issued under 26 U.S.C. 6001 and 6011. Section 1.6011-10 also issued under 26 U.S.C. 6001 and 6011. Section 1.6011-11 also issued under 26 U.S.C. 6001 and 6011. Section 1.6011-15 also issued under 26 U.S.C. 6001 and 26 U.S.C. 6011. Section 1.6011-18 also issued under 26 U.S.C. 6001 and 26 U.S.C. 6011. Section 1.6012-2 is also issued under the authority of 26 U.S.C. 6011 and 6012. Section 1.6013-6 also issued under 26 U.S.C. 7701(b)(11). Section 1.6015-1 also issued under 26 U.S.C. 6015(h). Section 1.6015-2 also issued under 26 U.S.C. 6015(h). Section 1.6015-3 also issued under 26 U.S.C. 6015(h). Section 1.6015-4 also issued under 26 U.S.C. 6015(h). Section 1.6015-5 also issued under 26 U.S.C. 6015(h). Section 1.6015-6 also issued under 26 U.S.C. 6015(h). Section 1.6015-7 also issued under 26 U.S.C. 6015(h). Section 1.6015-8 also issued under 26 U.S.C. 6015(h). Section 1.6015-9 also issued under 26 U.S.C. 6015(h). Section 1.6031(a)-1 also issued under section 404 of the Tax Equity and Fiscal Responsibility Act of 1982 (Public Law 97-248; 96 Stat. 324, 669) (TEFRA). Section 1.6033-4 also issued under 26 U.S.C. 6033. Section 1.6033-6 also issued under 26 U.S.C. 6033(i)(1). Section 1.6035-1 also issued under 26 U.S.C. 6035. Section 1.6035-2 also issued under 26 U.S.C. 6035(b). Section 1.6035-2T also issued under 26 U.S.C. 6035. Section 1.6037-2 also issued under 26 U.S.C. 6037. Section 1.6038-2 also issued under 26 U.S.C. 6038. Section 1.6038-2T also issued under 26 U.S.C. 6038(d). Section 1.6038-3 also issued under 26 U.S.C. 6038. Section 1.6038-4 also issued under 26 U.S.C. 6001, 6011, 6012, 6031, and 6038. Section 1.6038-5 also issued under 26 U.S.C. 6038. Section 1.6038A-1 also issued under 26 U.S.C. 6001. Section 1.6038A-2 also issued under 26 U.S.C. 6038A and 6038C. Section 1.6038A-3 also issued under 26 U.S.C. 6038A and 7701(l). Section 1.6038A-4 also issued under 26 U.S.C. 6038A. Section 1.6038A-5 also issued under 26 U.S.C. 6038A. Section 1.6038A-6 also issued under 26 U.S.C. 6038A. Section 1.6038A-7 also issued under 26 U.S.C. 6038A. Section 1.6038B-1 also issued under 26 U.S.C. 6038B. Section 1.6038B-1T also issued under 26 U.S.C 6038B. Section 1.6038B-2 also issued under 26 U.S.C. 6038B. Section 1.6038B-2T also issued under 26 U.S.C. 6038B. Section 1.6038D-0 also issued under 26 U.S.C. 6038D. Section 1.6038D-1 also issued under 26 U.S.C. 6038D. Section 1.6038D-2 also issued under 26 U.S.C. 6038D. Section 1.6038D-3 also issued under 26 U.S.C. 6038D. Section 1.6038D-4 also issued under 26 U.S.C. 6038D. Section 1.6038D-5 also issued under 26 U.S.C. 6038D. Section 1.6038D-6 also issued under 26 U.S.C. 6038D. Section 1.6038D-7 also issued under 26 U.S.C. 6038D. Section 1.6038D-8 also issued under 26 U.S.C. 6038D. Section 1.6039I-1 also issued under 26 U.S.C. 6039I. Section 1.6041-1 also issued under 26 U.S.C. 6041(a). Section 1.6041-2 also issued under 26 U.S.C. 6041(d). Section 1.6041-3 also issued under 26 U.S.C. 62 and 6041(a). Section 1.6042-3 also issued under 26 U.S.C. 6045. Section 1.6043-4 also issued under 26 U.S.C. 6043(c). Section 1.6045-1 also issued under 26 U.S.C. 6045. Section 1.6045-1 also issued under 26 U.S.C. 6045(a). Section 1.6045-1T also issued under 26 U.S.C. 6045(g). Section 1.6045-2 also issued under 26 U.S.C. 6045. Section 1.6045-3 also issued under 26 U.S.C. 6045. Section 1.6045-4 also issued under 26 U.S.C. 6045. Section 1.6045A-1 also issued under 26 U.S.C. 6045A(a), (b), (c). Section 1.6045B-1 also issued under 26 U.S.C. 6045B(a), (c), (e). Section 1.6046-1 also issued 26 U.S.C. 6046(b). Section 1.6046A-1 also issued under 26 U.S.C. 6046A. Section 1.6047-2 is also issued under 26 U.S.C. 6047(d). Section 1.6049-4 also issued under 26 U.S.C. 6049 (a), (b), and (d). Section 1.6049-5 also issued under 26 U.S.C. 6049 (a), (b), and (d). Section 1.6049-5T also issued under 26 U.S.C. 6049. Section 1.6049-6 also issued under 6049(a), (b), and (d). Section 1.6049-7 also issued under 26 U.S.C. 860G(e), 1275(c) and 26 U.S.C. 6049(d)(7)(D). Section 1.6049-9 also issued under 26 U.S.C. 6049(a). Section 1.6049-10 also issued under 26 U.S.C. 6049(a). Section 1.6050E-1 also issued under 26 U.S.C. 6050E. Section 1.6050H-1 also issued under 26 U.S.C. 6050H. Section 1.6050H-2 also issued under 26 U.S.C. 6050H. Section 1.6050H-3 also issued under 26 U.S.C. 6050H(h). Section 1.6050I-1 also issued under 26 U.S.C. 6050I. Section 1.6050I-2 also issued under 26 U.S.C. 6050I. Section 1.6050K-1 also issued under 26 U.S.C. 6050K(a). Section 1.6050M-1 also issued under 26 U.S.C. 6050M. Section 1.6050P-1 also issued under 26 U.S.C. 6050P. Section 1.6050P-2 also issued under 26 U.S.C. 6050P. Section 1.6050S-1 also issued under 26 U.S.C. 6050S(g). Section 1.6050S-2 also issued under 26 U.S.C. 6050S(g). Section 1.6050S-3 also issued under 26 U.S.C. 6050S(g). Section 1.6050S-4 also issued under 26 U.S.C. 6050S(g). Section 1.6050X-1 also issued under 26 U.S.C. 6050X(a), (b). Section 1.6050Y-2 also issued under 26 U.S.C. 6050Y(a). Section 1.6050Y-3 also issued under 26 U.S.C. 6050Y(b). Section 1.6050Y-4 also issued under 26 U.S.C. 6050Y(c). Sections 1.6055-1 and 1.6055-2 also issued under 26 U.S.C. 6055. Section 1.6060-1 also issued under 26 U.S.C. 6060(a). Section 1.6061-2T also issued under 26 U.S.C. 6061. Section 1.6065-2T also issued under 26 U.S.C. 6065. Section 1.6081-1 also issued under 26 U.S.C. 6081. Section 1.6081-2 also issued under 26 U.S.C. 6081. Section 1.6081-2T also issued under 26 U.S.C. 6081. Section 1.6081-3 also issued under 26 U.S.C. 6081. Section 1.6081-4 also issued under 26 U.S.C. 6081. Section 1.6081-5 also issued under 26 U.S.C. 6081. Section 1.6081-6 also issued under 26 U.S.C. 6081. Section 1.6081-6T also issued under 26 U.S.C. 6081. Section 1.6081-7 also issued under 26 U.S.C. 6081. Section 1.6081-8 also issued under 26 U.S.C. 6081(a). Section 1.6081-9 also issued under 26 U.S.C. 6081(a). Section 1.6081-10 also issued under 26 U.S.C. 6081. Section 1.6081-11 also issued under 26 U.S.C. 6081. Section 1.6109-2 also issued under 26 U.S.C. 6109(a). Sections 1.6302-1, 1.6302-2, 1.6302-3 and 1.6302-4 also issued under 26 U.S.C. 6302(h). Section 1.6411-4 also issued under 26 U.S.C. 6402(i) and 6411(c). Section 1.6417-0 also issued under 26 U.S.C. 6417(h). Section 1.6417-1 also issued under 26 U.S.C. 6417(h). Section 1.6417-2 also issued under 26 U.S.C. 6417(h). Section 1.6417-3 also issued under 26 U.S.C. 6417(h). Section 1.6417-4 also issued under 26 U.S.C. 6417(h). Section 1.6417-5 also issued under 26 U.S.C. 6417(h). Section 1.6417-6 also issued under 26 U.S.C. 6417(h). Section 1.6418-1 also issued under 26 U.S.C. 6418(g) and (h). Section 1.6418-2 also issued under 26 U.S.C. 6418(g) and (h). Section 1.6418-3 also issued under 26 U.S.C. 6418(g) and (h). Section 1.6418-4 also issued under 26 U.S.C. 6418(g) and (h). Section 1.6418-5 also issued under 26 U.S.C. 48(a)(10)(C) and 6418(g) and (h). Section 1.6418-4T also issued under 26 U.S.C. 6418(g)(1) and (h). Section 1.6654-2 also issued under 26 U.S.C. 6654(n). Section 1.6655-5 also issued under 26 U.S.C. 6655(i)(2). Section 1.6662-6 also issued under 26 U.S.C. 6662. Section 1.6695-1 also issued under 26 U.S.C. 6060(b) and 6695(b). Section 1.6695-1 also issued under 26 U.S.C. 6695(b). Section 1.6695-2 also issued under 26 U.S.C. 6695(g). Section 1.6695-2T also issued under 26 U.S.C. 6695(g). Section 1.6851-2 also issued under 26 U.S.C 6851(d). Section 1.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 1.7520-1T also issued under 26 U.S.C. 7520(c)(2). Section 1.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 1.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 1.7520-4 also issued under 26 U.S.C. 7520(c)(2). Section 1.7701(l)-1 also issued under 26 U.S.C. 7701(l). Section 1.7701(l)-3 also issued under 26 U.S.C. 7701(l). Section 1.7701(l)-4 also issued under 26 U.S.C. 7701(l) and 954(c)(6)(A). Section 1.7702-2 also issued under 26 U.S.C. 7702(k). Section 1.7872-5(b)(17) also issued under 26 U.S.C. 7872. Section 1.7872-5T also issued under 26 U.S.C. 7872. Section 1.7872-15 also issued under 26 U.S.C. 1275 and 7872. Section 1.7874-1 also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-1T also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-2 also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-3 is also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-4 also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-4T also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-5 also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-5T also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-6 also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-7 also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-8 also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-9 also issued under 26 U.S.C. 7874(c)(6) and (g). Section 1.7874-10 also issued under 26 U.S.C. 7874(c)(4) and (g). Section 1.7874-11 also issued under 26 U.S.C. 7874(g). Section 1.7874-12 also issued under 26 U.S.C. 7874(g).

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, T.D. 9381, 73 FR 8604, Feb. 15, 2008, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11607, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted. RELATED RULES

Amendments

[T.D. 9169, 69 FR 78154, Dec. 29, 2004]

Amendments

§1.861-9T. Allocation and apportionment of interest expense (temporary).

26 C.F.R. § 1.861-9T

(a)

In general. Any expense that is deductible under section 163 (including original issue discount) constitutes interest expense for purposes of this section, as well as for purposes of §§ 1.861-10T, 1.861-11T, 1.861-12T, and 1.861-13T. The term interest refers to the gross amount of interest expense incurred by a taxpayer in a given tax year. The method of allocation and apportionment for interest set forth in this section is based on the approach that, in general, money is fungible and that interest expense is attributable to all activities and property regardless of any specific purpose for incurring an obligation on which interest is paid. Exceptions to the fungibility rule are set forth in § 1.861-10T. The fungibility approach recognizes that all activities and property require funds and that management has a great deal of flexibility as to the source and use of funds. When borrowing will generally free other funds for other purposes, and it is reasonable under this approach to attribute part of the cost of borrowing to such other purposes. Consistent with the principles of fungibility, except as otherwise provided, the aggregate of deductions for interest in all cases shall be considered related to all income producing activities and assets of the taxpayer and, thus, allocable to all the gross income which the assets of the taxpayer generate, have generated, or could reasonably have been expected to generate. In the case of the interest expense of members of an affiliated group, interest expense shall be considered to be allocable to all gross income of the members of the group under § 1.861-11T. That section requires the members of an affiliated group to allocate and apportion the interest expense of each member of the group as if all members of such group were a single corporation. For the method of determining the interest deduction allowed to foreign corporations under section 882(c), see § 1.882-5.

(b)

Interest equivalents—

(1)

Certain expenses and losses—

(i)

General rule. For further guidance, see § 1.861-9(b)(1)(i).

(ii)

Examples. The rule of this paragraph (b)(1) may be illustrated by the following examples.

(2)

Certain foreign currency borrowings—

(i)

Rule. If a taxpayer borrows in a nonfunctional currency at a rate of interest that is less than the applicable federal rate (or its equivalent in functional currency if the functional currency is not the dollar), any swap, forward, future, option, or similar financial arrangement (or any combination thereof) entered into by the taxpayer or by a related person (as defined in § 1.861-8T(c)(2)) that exists during the term of the borrowing and that substantially diminishes currency risk with respect to the borrowing or interest expense thereon will be presumed to constitute a hedge of such borrowing, unless the taxpayer can demonstrate on the basis of facts and circumstances that the two transactions are in fact unrelated. Under this presumption, the currency loss incurred on the borrowing during taxable years beginning after December 31, 1988, in connection with hedged nonfunctional currency borrowings, reduced or increased by the gain or loss on the hedge, will be apportioned in the same manner as interest expense. This presumption can be rebutted by a showing that the financial arrangement was entered into in connection with hedging currency exposure arising in the ordinary course of a trade or business (other than with respect to the borrowing).

(ii)

Examples. The principles of this paragraph (b)(2) may be illustrated by the following examples.

(3)

Losses on sale of certain receivables—

(1)

General rule. Any loss on the sale of a trade receivable (as defined in § 1.954-2(h)) shall be allocated and apportioned, solely for purposes of this section and §§ 1.861-10T, 1.861-11T, 1.861-12T, and 1.861-13T, in the same manner as interest expense, unless at the time of sale of the receivable, it bears interest at a rate which is at least 120 percent of the short term applicable federal rate (as determined under section 1274(d) of the Code), or its equivalent in foreign currency in the case of receivables denominated in foreign currency, determined at the time the receivable arises. This treatment shall not affect the characterization of such expense as interest for other purposes of the Internal Revenue Code.

(ii)

(A)

Exceptions. To the extent that a loss on the sale of a trade receivable exceeds the discount on the receivable that would be computed applying to the amount received on the sale of the receivable 120 percent of the applicable federal rate (or its equivalent in foreign currency in the case of receivables denominated in foreign currency) for the period commencing with the date on which the receivable is sold and ending with the earlier of the date on which the receivable begins to bear interest at such rate or the anticipated payment date of the receivable, such excess shall not be allocated and apportioned in the same manner as interest expense but rather shall be allocated and apportioned to the gross income generated by the receivable. In cases of transfers of receivables to a domestic international sales corporation described § 1.994-1(c)(6)(v), the rule of this paragraph (b)(3) shall not apply for purposes of computing combined taxable income.

(B)

Example. On October 1, X sells a widget to Y for $100 payable in 30 days, after which the receivable will bear stated interest at 13 percent. On October 4, X sells Y's obligation to Z for $98. Assume that the applicable federal rate for the month of October is 10 percent. Applying 120 percent of the applicable federal rate to the $98 received on the sale of the receivable, the obligation is discounted at a 12 percent rate for a period of 27 days. At this discount rate, the obligation would have sold for $99.22. Thus, 88 cents of the $2 loss on the sale is apportioned in the same manner as interest expense, and $1.22 of the $2 loss on the sale is directly allocated to the income generated on the widget sale.

(4)

Rent in certain leasing transactions. [Reserved]

(5)

Treatment of bond premium—

(i)

Treatment by the issuer. If a bond or other debt obligation is issued at a premium, an amount of interest expense incurred by the issuer on that bond or other debt obligation equal to the amortized portion of that premium that is included in gross income for the year shall be allocated and apportioned solely to the amortized portion of premium derived by the issuer for the year.

(ii)

Treatment by the holder. If a bond or debt obligation is purchased at a premium, the portion of that premium amortized during the year by the holder under section 171 and the regulations thereunder shall be allocated and apportioned solely to interest income derived from the bond by the holder for the year.

(6)

Financial products that alter effective cost of borrowing—

(i)

In general. Various derivative financial products can be part of transactions or series of transactions described in paragraph (b)(1) of this section. Such derivative financial products, including interest rate swaps, options, forwards, caps, and collars, potentially alter a taxpayer's effective cost of borrowing with respect to an actual liability of the taxpayer. For example, a taxpayer that is obligated to pay interest at a fixed rate may, in effect, pay interest at a floating rate by entering into an interest rate swap. Similarly, a taxpayer that is obligated to pay interest at a floating rate may, in effect, limit its exposure to rising interest rates by purchasing a cap. Such a taxpayer may have gains or losses associated with such derivative financial products. This paragraph (b)(6) provides rules for the treatment of gains and losses from such derivative financial products (“financial products”) that are part of transactions described in paragraph (b)(1) of this section and that are used by the taxpayer to alter its effective cost of borrowing with respect to an actual liability. This paragraph (b)(6) shall only apply where the hedge and the borrowing are in the same currency and shall not apply to the extent otherwise provided in section 988 and the regulations thereunder. The allocation and apportionment of a loss under this paragraph (b) shall not affect the characterization of such loss as capital or ordinary for other purposes of the Code and the regulations thereunder.

(ii)

Definition of gain and loss. For purposes of this paragraph (b)(6), the term “gain” refers to the excess of the amounts properly taken into income under a financial product that alters the effective cost of borrowing over the amounts properly allowed as a deduction thereunder within a given taxable year. See. e.g., Notice 89-21. The term “loss” refers to the excess of the amounts properly allowed as a deduction under such a financial product over the amounts properly taken into income thereunder within a given taxable year.

(iii)

Treatment of gain or loss on the disposition of a financial product. [Reserved]

(iv)

Entities that are not financial services entities. An entity that does not constitute a financial services entity within the meaning of § 1.904-4(e)(3) shall treat gains and losses on financial products described in paragraph (b)(6)(i) of this section as follows.

(A)

Losses. Losses on any financial product described in paragraph (b)(6)(i) of this section shall be apportioned in the same manner as interest expense whether or not such financial product is identified by the taxpayer under paragraph (b)(6)(iv)(C) of this section as a liability hedge.

(B)

Gains. Gains on any financial product described in paragraph (b)(6)(i) of this section shall reduce the taxpayer's total interest expense that is subject to apportionment, but only if such financial product is identified by the taxpayer under paragraph (b)(6)(iv)(C) of this section as a liability hedge. Such reduction is accomplished by directly allocating interest expense to the income derived from such a financial product.

(C)

Identification of financial products. A taxpayer can identify a financial product described in paragraph (b)(6)(i) of this section as hedging a particular interest-bearing liability (or any group of such liabilities) by clearly identifying on its books and records on the same day that it becomes a party to such arrangement that such arrangement hedges a given liability (or group of liabilities). In the case of a partial hedge, such identification shall apply to only that part of the liability that is hedged. If the taxpayer clearly identifies on its books and records a financial product as a hedge of an interest-bearing asset (or any group of such assets), it will create a rebuttable presumption that such financial product is not described in paragraph (b)(6)(i) of this section. A taxpayer may identify a hedge as relating to an anticipated liability, provided that such liability is in fact incurred within 120 days following the date of such identification. Gains and losses on such an anticipatory arrangement accruing prior to the time at which the liability is incurred shall constitute an adjustment to interest expense.

(v)

Financial services entities. [Reserved]

(vi)

Dealers. The rule of paragraph (b)(6)(iv) of this section shall not apply to a person acting in its capacity as a regular dealer in the financial products described in paragraph (b)(6)(i) of this section. Instead, losses sustained by a regular dealer in connection with such financial products shall be allocated to the class of gross income from such arrangements. Gains of a regular dealer in notional principal contracts are governed by the rules of § 1.863-7T(b). Amounts received or accrued by any person from any financial product that is integrated as specified in Notice 89-90 with an asset shall not be treated as amounts received or accrued by a person acting in its capacity as a regular dealer in financial products.

(vii)

Examples. The principles of this paragraph (b)(6) may be illustrated by the following examples.

(7)

Foreign currency gain or loss. In addition to the rules of paragraph (b)(1), (b)(2), and (b)(6) of this section, any foreign currency loss that is treated as an adjustment to interest expense under regulations issued under section 988 shall be allocated and apportioned in the same manner as interest expense. Any foreign currency gain that is treated as an adjustment to interest expense under regulations issued under section 988 shall offset apportionable interest expense.

(8)

Guaranteed payments. For further guidance, see § 1.861-9(b)(8).

(c)

Allowable deductions. In order for an interest expense to be allocated and apportioned, it must first be determined that the interest expense is currently deductible. A number of provisions in the Code disallow or suspend deductions of interest expense or require the capitalization thereof.

(1)

Disallowed deductions. A taxpayer does not allocate and apportion interest expense under this section that is permanently disallowed as a deduction by operation of section 163(h), section 265, or any other provision or rule that permanently disallows the deduction of interest expense.

(2)

Section 263A. Section 263A requires the capitalization of interest expense that is allocable to designated types of property. Any interest expense that is capitalized under section 263A does not constitute deductible interest expense for purposes of this section. Furthermore, interest expense capitalized in inventory or depreciable property is not separately allocated and apportioned when the inventory is sold or depreciation is allowed. Capitalized interest expense is effectively allocated and apportioned as part of, and in the same manner as, the cost of goods sold, amortization, or depreciation deduction.

(3)

Section 163(d). Section 163(d) suspends the deduction for interest expense to the extent that it exceeds net investment income. In the year that suspended investment interest expense becomes allowable under the rules of section 163(d), that interest expense is apportioned under rules set forth in paragraph (d)(1) of this section as though it were incurred in the taxable year in which the expense is deducted.

(4)

Section 469—

(i)

General rule. Section 469 suspends the deduction of passive activity losses to the extent that they exceed passive activity income for the year. Passive activity losses may consist in part of interest expense properly allocable to passive activity. In the year that suspended interest expense becomes allowable as a deduction under the rules of section 469, that interest expense is apportioned under rules set forth in paragraph (d)(1) of this section as though it were incurred in the taxable year in which the expense is deducted.

(ii)

Identification of the interest component of a suspended passive loss. A suspended passive loss may consist of a variety of items of expense other than interest expense. Suspended interest expense for any taxable year is computed by multiplying the total suspended passive loss for the year by a fraction, the numerator of which is passive interest expense for the year (determined under regulations issued under section 163) and the denominator of which is total passive expenses for the year. The amount of the suspended interest expense that is considered to be deductible in a subsequent taxable year is computed by multiplying the amount of any cumulative suspended interest expense (reduced by suspended interest expense allowed as a deduction in prior taxable years) times a fraction, the numerator of which is the portion of cumulative suspended passive losses that become deductible in the taxable year and the denominator of which is the cumulative suspended passive losses for prior taxable years (reduced by suspended passive losses allowed as deductions in prior taxable years).

(iii)

Example. The rules of this paragraph (c)(4) may be illustrated by the following example.

(5)

Section 163(j). For further guidance, see § 1.861-9(c)(5).

(d)

Apportionment rules for individuals, estates, and certain trusts—

(1)

United States individuals. In the case of taxable years beginning after December 31, 1986, individuals generally shall apportion interest expense under different rules according to the type of interest expense incurred. The interest expense of individuals shall be characterized under the regulations issued under section 163. However, in the case of an individual whose foreign source income (including income that is excluded under section 911) does not exceed a gross amount of $5,000, the apportionment of interest expense under this section is not required. Such an individual's interest expense may be allocated entirely to domestic source income.

(i)

Interest incurred in the conduct of a trade or business. An individual who incurs business interest described in section 163(h)(2)(A) shall apportion such interest expense using an asset method by reference to the individual's business assets.

(ii)

Investment interest. An individual who incurs investment interest described in section 163(h)(2)(B) shall apportion that interest expense on the basis of the individual's investment assets.

(iii)

Interest incurred in a passive activity. An individual who incurs passive activity interest described in section 163(h)(2)(C) shall apportion that interest expense on the basis of the individual's passive activity assets. Individuals who receive a distributive share of interest expense incurred in a partnership are subject to special rules set forth in paragraph (e) of this section.

(iv)

Qualified residence and deductible personal interest. Individuals who incur qualified residence interest described in section 163(h)(2)(D) shall apportion that interest expense under a gross income method, taking into account all income (including business, passive activity, and investment income) but excluding income that is exempt under section 911. For purposes of this section, any qualified residence that is rented shall be considered to be a business asset for the period in which it is rented, with the result that the interest on such a residence is not apportioned under this subdivision (iv) but instead under subdivisions (i) or (iii) of this paragraph (d)(1). To the extent that personal interest described in section 163(h)(2) remains deductible under transitional rules, individuals shall apportion such interest expense in the same manner as qualified residence interest.

(v)

Example. The following example illustrates the principles of this section.

(2)

Nonresident aliens—

(i)

General rule. For taxable years beginning on or after January 1, 1988, interest expense incurred by a nonresident alien shall be considered to be connected with income effectively connected with a United States trade or business only to the extent that interest expense is incurred with respect to liabilities that—

(A)

Are entered on the books and records of the United States trade or business when incurred, or

(B)

Are secured by assets that generate such effectively connected income.

(ii)

Limitations—

(A)

Maximum debt capitalization. Interest expense incurred by a nonresident alien is not considered to be connected with effectively connected income to the extent that it is incurred with respect to liabilities that exceed 80 percent of the gross assets of the United States trade or business.

(B)

Collateralization by other assets. Interest expense on indebtedness that is secured by specific assets (not including the general credit of the nonresident alien) other than the assets of the United States trade or business shall not be considered to be connected with effectively connected income.

(3)

Estates and trusts. Estates shall be treated in the same manner as individuals. In the case of a trust that is beneficially owned by individuals and is a complex trust, the trust shall be treated in the same manner as individuals under the rules of paragraph (d) of this section, except that no de minimis amount shall apply. In the case of a trust that is beneficially owned by one or more corporations, the trust shall be treated either as a partnership or as a corporation depending on how the trust is characterized under the rules of section 7701 and the regulations thereunder.

(e)

Partnerships—

(1)

In general—aggregate rule. A partner's distributive share of the interest expense of a partnership that is directly allocable under § 1.861-10T to income from specific partnership property shall be treated as directly allocable to the income generated by such partnership property. Subject to the exceptions set forth in paragraph (e)(4), a partner's distributive share of the interest expense of a partnership that is not directly allocable under § 1.861-10T generally is considered related to all income producing activities and assets of the partner and shall be subject to apportionment under the rules described in this paragraph. For purposes of this section, a partner's percentage interest in a partnership shall be determined by reference to the partner's interest in partnership income for the year. Similarly, a partner's pro rata share of partnership assets shall be determined by reference to the partner's interest in partnership income for the year.

(2)

-(3) [Reserved]. For further guidance see § 1.861-9(e)(2) through (e)(3).

(4)

Less than 10 percent limited partners and less than 10 percent corporate general partners—entity rule—

(i)

Partnership interest expense. For further guidance, see § 1.861-9(e)(4)(i).

(ii)

Other interest expense of the partner. For purposes of apportioning other interest expense of the partner on an asset basis, the partner's interest in the partnership, and not the partner's pro rata share of partnership assets, is considered to be the relevant asset. The value of this asset for apportionment purposes is either the tax book value or fair market value of the partner's partnership interest, depending on the method of apportionment used by the taxpayer. This amount of a partner's interest in the partnership is allocated among various limitation categories in the same manner as partnership interest expense (that is not directly allocable under § 1.861-10T) is apportioned in subdivision (i) of this paragraph (e)(4). If the partner uses the tax book value method of apportionment, the partner's interest in the partnership must be reduced, for this purpose, to the extent that the partner's basis consists of liabilities that are taken into account under section 752. Under either the tax book value or fair market value method of apportionment, for purposes of this section only, the value of the partner's interest in the partnership must be reduced by the principal amount of any indebtedness of the partner the interest on which is directly allocated to its partnership interest under § 1.861-10T.

(5)

Tiered partnerships. If a partnership is a partner in another partnership, the distributive share of interest expense of a lower-tier partnership that is subject to the rules of paragraph (e)(4) shall not be reapportioned in the hands of any higher-tier partner. However, the distributive share of interest expense of lower-tier partnership that is subject to the rules of paragraph (e) (2) or (3) shall be apportioned by the partner of the higher-tier partnership or by any higher-tier partnership to which the rules of paragraph (e)(4) apply, taking into account the partner's indirect pro rata share of the lower-tier partnership's income or assets.

(6)

Example—

(i)

Facts. A, B, and C are partners in a limited partnership. A is a corporate general partner, owns a 5 percent interest in the partnership, and has an adjusted basis in its partnership interest, determined without regard to section 752 of the Code, of $5. A's investment in the partnership is not held in the ordinary course of the taxpayer's active trade or business, as defined in § 1.904-7(i)(2). B, a corporate limited partner, owns a 70 percent interest in the partnership, and has an adjusted basis in its partnership interest, determined without regard to section 752 of the Code, of $70. C is an individual limited partner, owns a 25 percent interest in the partnership, and has an adjusted basis in the partnership interest, determined without regard to section 752 of the Code, of $25. The partners' interests in the profits and losses of the partnership conform to their respective interests. None of the interest expense incurred directly by any of the partners is directly allocable to their partnership interest under § 1.861-10T. The ABC partnership's sole assets are two apartment buildings, one domestic and the other foreign. The domestic building has an adjusted inside basis of $600 and the foreign building has an adjusted inside basis of $500. Each of the buildings is subject to a nonrecourse liability in the amount of $500. The ABC partnership's total interest expense for the taxable year is $120, both nonrecourse liabilities bearing interest at the rate of 12 percent. The indebtedness on the domestic building qualifies for direct allocation under the rules of § 1.861-10T. The indebtedness on the foreign building does not so qualify. The partnership incurred no foreign taxes. The partnership's gross income for the taxable year is $360, consisting of $100 in foreign source income and $260 in domestic source income. Under § 1.752-1(e), the nonrecourse liabilities of the partnership are allocated among the partners according to their share of the partnership profits. Accordingly, the adjusted basis of A, B, and C in their respective partnership interests (for other than apportionment purposes) is, respectively, $55, $770, and $275.

(ii)

Determination of the amount of partnership interest expense that is subject to allocation and apportionment. Interest on the nonrecourse loan on the domestic building is, under § 1.861-10T, directly allocable to income from that investment. The interest expense is therefore directly allocable to domestic income. Interest on the nonrecourse loan on the foreign building is not directly allocable. The interest expense is therefore subject to allocation and apportionment. Thus, $60 of interest expense is directly allocable to domestic income and $60 of interest expense is subject to allocation and apportionment.

(iii)

Analysis for Partner A. A's distributive share of the partnership's gross income is $18, which consists of $5 in foreign source income and $13 in domestic source income. A's distributive share of the ABC interest expense is $6, $3 of which is directly allocable to domestic income and $3 of which is subject to apportionment. After direct allocation of qualifying interest expense, A's distributive share of the partnership's gross income consists of $5 in foreign source income and $10 in domestic source income. Because A is a less than 10 percent corporate partner, A's distributive share of any foreign source partnership income is considered to be passive income. Accordingly, in apportioning the $3 of partnership interest expense that is subject to apportionment on a gross income method, one-third ($1) is apportioned to foreign source passive income and two-thirds ($2) is apportioned to domestic source income. In apportioning its other interest expense, A uses the tax book value method. A's adjusted basis in A's partnership interest ($55) includes A's share of the partnership's liabilities ($50), which are included in basis under section 752. For purposes of apportioning other interest expense, A's adjusted basis in the partnership must be reduced to the extent of such liabilities. Thus, A's adjusted basis in the partnership, for purposes of apportionment, is $5. For the purpose of apportioning A's other interest expense, this $5 in basis is characterized one-third as a foreign passive asset and two-thirds as a domestic asset, which is the ratio determined in paragraph (e)(4)(i).

(iv)

Analysis for Partner B. B's distributive share of the ABC interest expense is $84, $42 of which is directly allocable to domestic income and $42 of which is subject to apportionment. As a corporate limited partner whose interest in the partnership is 10 percent or more, B is subject to the rules of paragraph (e)(2) and paragraph (f) of this section. These rules require that a corporate partner apportion its distributive share of partnership interest expense at the partner level on the asset method described in paragraph (g) of this section by reference to its corporate assets, which include, for this purpose, 70 percent of the partnership's assets, adjusted in the manner described in § 1.861-10T(e) to reflect directly allocable interest expense.

(v)

Analysis for Partner C. C's distributive share of the ABC interest expense is $30, $15 of which is directly allocable to domestic income and $15 of which is subject to apportionment. As an individual limited partner whose interest in the partnership is 10 percent or more, C is subject to the rules of paragraph (e)(3) of this section. These rules require that an individual's share of partnership interest expense be classified under regulations issued under section 163(h) and then apportioned under the rules applicable to individuals, which are set forth in paragraph (d) of this section.

(7)

Foreign partners. The distributive share of partnership interest expense of a nonresident alien who is a partner in a partnership shall be considered to be connected with effectively connected income based on the percentage of the assets of the partnership that generate effectively connected income. No interest expense directly incurred by the partner may be allocated and apportioned to effectively connected income derived by the partnership.

(8)

Special rule for downstream partnership loans. For further guidance, see § 1.861-9(e)(8) through (10).

(9)

-(10) [Reserved]

(f)

Corporations—

(1)

Domestic corporations. Domestic corporations shall apportion interest expense using the asset method described in paragraph (g) of this section and the applicable rules of §§ 1.861-10T through 1.861-13T.

(2)

Section 987 QBUs of domestic corporations. For further guidance, see § 1.861-9(f)(2) through (f)(3)(i).

(3)

(i)

[Reserved]

(ii)

Manner of election. The election to use the asset method described in paragraph (g) of this section or the modified gross income method described in paragraph (j) of this section may be made either by the controlled foreign corporation or by the controlling United States shareholders on behalf of the controlled foreign corporation. The term “controlling United States shareholders” means those United States shareholders (as defined in section 951(b)) who, in aggregate, own (within the meaning of section 958(a)) greater than 50 percent of the total combined voting power of all classes of stock of the foreign corporation entitled to vote. In the case of a controlled foreign corporation in which the United States shareholders own stock representing more than 50 percent of the value of the stock in such corporation, but less than 50 percent of the combined voting power of all classes of stock in such corporation, the term “controlling United States shareholders” means all the United States shareholders (as defined in section 951(b)) who own (within the meaning of section 958(a)) stock of the controlled foreign corporation. All United States shareholders are bound by the election of either the controlled foreign corporation or the controlling United States shareholders. For guidance relating to the time and manner of this election, see § 1.861-9(f)(3)(ii).

(iii)

Consistency requirement. The same method of apportionment must be employed by all controlled foreign corporations in which a United States taxpayer and the members of its affiliated group (as defined in § 1.861-11T(d)) constitute controlling United States shareholders. A controlled foreign corporation that is required by this paragraph (f)(3)(iii) to utilize a particular method of apportionment must do so with respect to all United States shareholders.

(iv)

Stock characterization. Pursuant to § 1.861-12T(c)(2), the stock of a controlled foreign corporation shall be characterized in the hands of any United States shareholder using the same method that the controlled foreign corporation uses to apportion its interest expense.

(4)

Noncontrolled 10-percent owned foreign corporations. For further guidance, see § 1.861-9(f)(4).

(5)

Other relevant provisions. Affiliated groups of corporations are subject to special rules set forth in § 1.861-11T. Section 1.861-12T sets forth rules relating to basis adjustments for stock in nonaffiliated 10 percent owned corporations, special rules relating to the consideration and characterization of certain assets in the apportionment of interest expense, and to other special rules pertaining to the apportionment of interest expense. Section 1.861-13T contains transition rules limiting the application of the rules of §§ 1.861-8T through 1.861-12T, which are otherwise applicable to taxable years beginning after 1986. In the case of an affiliated group of corporations as defined in § 1.861-11T(d), any reference in §§ 1.861-8T through 1.861-13T to the “taxpayer” with respect to the allocation and apportionment of interest expense generally denotes the entire affiliated group of corporations and not the separate members thereof, unless the context otherwise requires.

(g)

Asset method—

(1)

In general.

(i)

Under the asset method, the taxpayer apportions interest expense to the various statutory groupings based on the average total value of assets within each such grouping for the taxable year, as determined under the asset valuation rules of this paragraph (g)(1) and paragraph (g)(2) of this section and the asset characterization rules of paragraph (g)(3) of this section and § 1.861-12T. Except to the extent otherwise provided (see, e.g., paragraph (d)(1)(iv) of this section), taxpayers must apportion interest expense only on the basis of asset values and may not apportion any interest deduction on the basis of gross income.

(ii)

For further guidance, see § 1.861-9(g)(1)(ii) through (g)(2)(i).

(iii)

-(v) [Reserved]

(2)

(i)

-(ii) [Reserved]

(iii)

Adjustment for directly allocated interest. Prior to averaging, the year-end value of any asset to which interest expense is directly allocated during the current taxable year under the rules of § 1.861-10T (b) or (c) shall be reduced (but not below zero) by the percentage of the principal amount of indebtedness outstanding at year-end equal to the percentage of all interest on the debt for the taxable year that is directly allocated.

(iv)

Assets in intercompany transactions. In the application of the asset method described in this paragraph (g), the tax book value of assets transferred between affiliated corporations in intercompany transactions shall be determined without regard to the gain or loss that is deferred under the regulations issued under section 1502.

(v)

[Reserved]

(3)

Characterization of assets. Assets are characterized for purposes of this section according to the source and type of the income that they generate, have generated, or may reasonably be expected to generate. The physical location of assets is not relevant to this determination. Subject to the special rules of paragraph (h) concerning the application of the fair market value method of apportionment, the value of assets within each statutory grouping and the residual grouping at the beginning and end of each year shall be determined by dividing the taxpayer's assets into three types—

(i)

Single category assets. Assets that generate income that is exclusively within a single statutory grouping or the residual grouping;

(ii)

Multiple category assets. Assets that generate income within more than one grouping of income (statutory or residual); and

(iii)

Assets without directly identifiable yield. Assets that produce no directly identifiable income yield or that contribute equally to the generation of all the income of the taxpayer (such as assets used in general and administrative functions).

(h)

Fair market value method. For further guidance, see § 1.861-9(h).

(1)

Determination of values—

(i)

Valuation of group assets. The taxpayer shall first determine the aggregate value of the assets of the taxpayer on the last day of its taxable year without excluding the value of stock in foreign subsidiaries or any other asset. In the case of a publicly traded corporation, this determination shall be equal to the aggregate trading value of the taxpayer's stock traded on established securities markets at year-end increased by the taxpayer's year-end liabilities to unrelated persons and its pro rata share of year-end liabilities of all related persons owed to unrelated persons. In determining whether persons are related, § 1.861-8T(c)(2) shall apply. In the case of a corporation that is not publicly traded, this determination shall be made by reference to the capitalization of corporate earnings, in accordance with the rules of Rev. Rul. 68-609. In either case, control premium shall not be taken into account.

(ii)

Valuation of tangible assets. The taxpayer shall determine the value of all assets held by the taxpayer and its pro rata share of assets held by other related persons on the last day of its taxable year, excluding stock or indebtedness in such persons, any intangible property as defined in section 936(h)(3)(B), or goodwill or going concern value intangibles. Such valuations shall be made using generally accepted valuation techniques. For this purpose, assets may be combined into reasonable groupings. Statistical methods of valuation may only be used in connection with fungible property, such as commodities. The value of stock in any corporation that is not a related person shall be determined under the rules of paragraph (h)(1)(i) of this section, except that no liabilities shall be taken into account.

(iii)

Computation of intangible asset value. The value of the intangible assets of the taxpayer and of intangible assets of all related persons attributable to the taxpayer's ownership in related persons is equal to the amount obtained by subtracting the amount determined under paragraph (h)(1)(ii) of this section from the amount determined under paragraph (h)(1)(i) of this section.

(2)

Apportionment of intangible asset value. The value of the intangible assets determined under paragraph (h)(1)(iii) of this section is apportioned among the taxpayer and all related persons in proportion to the net income before interest expense of the taxpayer and the taxpayer's pro rata share of the net income before interest expense of each related person held by the taxpayer, excluding income that is passive under § 1.904-4(b). For this purpose, net income is determined before reduction for income taxes. Net income of the taxpayer and of related persons shall be computed without regard to dividends or interest received from any person that is related to the taxpayer.

(3)

Characterization of affiliated group's portion of intangible asset value. The portion of the value of intangible assets of the taxpayer and related persons that is apportioned to the taxpayer under paragraph (h)(2) of this section is characterized on the basis of net income before interest expense, as determined under paragraph (h)(2) of this section, of the taxpayer within each statutory or residual grouping of income.

(4)

[Reserved]. For further guidance see § 1.861-9(h)(4).

(5)

[Reserved]. For further guidance, see § 1.861-9(h)(5).

(6)

Adjustments for apportioning related person expenses. For purposes of apportioning expenses of a related person, the value of stock in a second related person as otherwise determined under paragraph (h)(4) of this section (which is determined on the basis of the taxpayer's percentage ownership interest in the second related person) shall be increased to reflect the first related person's percentage ownership interest in the second related person to the extent it is larger.

(i)

[Reserved]. For further guidance, see § 1.861-9(i).

(j)

Modified gross income method. Subject to rules set forth in paragraph (f)(3) of this section, the interest expense of a controlled foreign corporation may be allocated according to the following rules.

(1)

Single-tier controlled foreign corporation. In the case of a controlled foreign corporation that does not hold stock in any lower-tier controlled foreign corporation, the interest expense of the controlled foreign corporation shall be apportioned based on its gross income.

(2)

Multiple vertically owned controlled foreign corporations. In the case of a controlled foreign corporation that holds stock in any lower-tier controlled foreign corporation, the interest expense of that controlled foreign corporation and such upper-tier controlled foreign corporation shall be apportioned based on the following methodology:

(i)

Step 1. Commencing with the lowest-tier controlled foreign corporation in the chain, allocate and apportion its interest expense based on its gross income as provided in paragraph (j)(1) of this section, yielding gross income in each grouping net of interest expense.

(ii)

Step 2. For further guidance, see § 1.861-9(j)(2)(ii).

(k)

Effective/applicability dates. In general, the rules of this section apply for taxable years beginning after December 31, 1986. Paragraphs (b)(2) (concerning the treatment of certain foreign currency) and (d)(2) (concerning the treatment of interest incurred by nonresident aliens) of this section are applicable for taxable years commencing after December 31, 1988. Taxpayers may also apply paragraph (b)(6) of this section to any gain that was realized on any transaction described in paragraph (b)(6)(i) of this section that was entered into after September 14, 1988, and on or before August 11, 1989, if the taxpayer can demonstrate to the satisfaction of the Commissioner that substantially all of the arrangements described in paragraph (b)(6)(i) of this section to which the taxpayer became a party during that interim period were identified on the taxpayer's books and records with the liabilities of the taxpayer in a substantially contemporaneous manner and that all losses and expenses that are subject to the rules of paragraph (b)(6) of this section were treated in the same manner as interest expense. For this purpose, arrangements that were identified in a substantially contemporaneous manner with the taxpayer's assets shall be ignored. For further guidance, see § 1.861-9(k).

Notes, amendments, and revision history

Amendments

[T.D. 8228, 53 FR 35477, Sept. 14, 1988]

Authority

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, T.D. 9381, 73 FR 8604, Feb. 15, 2008, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11607, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted. RELATED RULES

Amendments

[T.D. 9169, 69 FR 78154, Dec. 29, 2004]

Amendments

[T.D. 8228, 53 FR 35477, Sept. 14, 1988]

§1.861-10. Special allocations of interest expense.

26 C.F.R. § 1.861-10

(a)

In general. This section applies to all taxpayers and provides exceptions to the rules of § 1.861-9 that require the allocation and apportionment of interest expense based on all assets of all members of the affiliated group. Section 1.861-10T(b) provides rules for the direct allocation of interest expense to the income generated by certain assets that are subject to qualified nonrecourse indebtedness. Section 1.861-10T(c) provides rules for the direct allocation of interest expense to income generated by certain assets that are acquired in an integrated financial transaction. Section 1.861-10T(d) provides special rules that apply to all transactions described in § 1.861-10T(b) and (c). Paragraph (e) of this section requires the direct allocation of third-party interest expense of an affiliated group to such group's investments in related controlled foreign corporations in cases involving excess related person indebtedness (as defined therein). See also § 1.861-9T(b)(5), which requires the direct allocation of amortizable bond premium. Paragraph (f) of this section provides a special rule for certain regulated utility companies. Paragraph (g) of this section is reserved. Paragraph (h) of this section sets forth applicability dates.

(b)

-(d) [Reserved]

(e)

Treatment of certain related group indebtedness—

(1)

In general. If, for any taxable year beginning after December 31, 1991, a U.S. shareholder (as defined in paragraph (e)(5)(i) of this section) has both—

(i)

Excess related group indebtedness (as determined under Step One in paragraph (e)(2) of this section) and

(ii)

Excess U.S. shareholder indebtedness (as determined under Step Two in paragraph (e)(3) of this section), the U.S. shareholder shall allocate, to its gross income in the various separate limitation categories described in section 904(d)(1), a portion of its interest expense paid or accrued to any obligee who is not a member of the affiliated group (as defined in § 1.861-11T(d)) of the U.S. shareholder (“third party interest expense”), excluding amounts allocated under paragraphs (b) and (c) of § 1.861-10T. The amount of third party interest expense so allocated shall equal the total amount of interest income derived by the U.S. shareholder during the year from related group indebtedness, multiplied by the ratio of the lesser of the foregoing two amounts of excess indebtedness for the year to related group indebtedness for the year. This amount of third party interest expense is allocated as described in Step Three in paragraph (e)(4) of this section.

(2)

Step One: Excess related group indebtedness.

(i)

The excess related group indebtedness of a U.S. shareholder for the year equals the amount by which its related group indebtedness for the year exceeds its allowable related group indebtedness for the year.

(ii)

The “related group indebtedness” of the U.S. shareholder is the average of the aggregate amounts at the beginning and end of the year of indebtedness owed to the U.S. shareholder by each controlled foreign corporation which is a related person (as defined in paragraph (e)(5)(ii) of this section) with respect to the U.S. shareholder.

(iii)

The “allowable related group indebtedness” of a U.S. shareholder for the year equals—

(A)

The average of the aggregate values at the beginning and end of the year of the assets (including stock holdings in and obligations of related persons, other than related controlled foreign corporations) of each related controlled foreign corporation, multiplied by

(B)

The foreign base period ratio of the U.S. shareholder for the year.

(iv)

The “foreign base period ratio” of the U.S. shareholder for the year is the average of the related group debt-to-asset ratios of the U.S. shareholder for each taxable year comprising the foreign base period for the current year (each a “base year”). For this purpose, however, the related group debt-to-asset ratio of the U.S. shareholder for any base year may not exceed 110 percent of the foreign base period ratio for that base year. This limitation shall not apply with respect to any of the five taxable years chosen as initial base years by the U.S. shareholder under paragraph (e)(2)(v) of this section or with respect to any base year for which the related group debt-to-asset ratio does not exceed 0.10.

(v)

(A)

The foreign base period for any current taxable year (except as described in paragraphs (e)(2)(v) (B) and (C) of this section) shall consist of the five taxable years immediately preceding the current year.

(B)

The U.S. shareholder may choose as foreign base periods for all of its first five taxable years for which this paragraph (e) is effective the following alternative base periods:

(1) For the first effective taxable year, the 1982, 1983, 1984, 1985 and 1986 taxable years;

(2) For the second effective taxable year, the 1983, 1984, 1985 and 1986 taxable years and the first effective taxable year;

(3) For the third effective taxable year, the 1984, 1985 and 1986 taxable years and the first and second effective taxable years;

(4) For the fourth effective taxable year, the 1985 and 1986 taxable years and the first, second and third effective taxable years; and

(5) For the fifth effective taxable year, the 1986 taxable year and the first, second, third and fourth effective taxable years.

(C)

If, however, the U.S. shareholder does not choose, under paragraph (e)(10)(ii) of this section, to apply this paragraph (e) to one or more taxable years beginning before January 1, 1992, the U.S. shareholder may not include within any foreign base period the taxable year immediately preceding the first effective taxable year. Thus, for example, a U.S. shareholder for which the first effective taxable year is the taxable year beginning on October 1, 1992, may not include the taxable year beginning on October 1, 1991, in any foreign base period. Assuming that the U.S. shareholder does not elect the alternative base periods described in paragraph (e)(2)(v)(B) of this section, the initial foreign base period for the U.S. shareholder will consist of the taxable years beginning on October 1 of 1986, 1987, 1988, 1989, and 1990. The foreign base period for the U.S. shareholder for the following taxable year, beginning on October 1, 1993, will consist of the taxable years beginning on October 1 of 1987, 1988, 1989, 1990, and 1992.

(D)

If the U.S. shareholder chooses the base periods described in paragraph (e)(2)(v)(B) of this section as foreign base periods, it must make a similar election under paragraph (e)(3)(v)(B) of this section with respect to its U.S. base periods.

(vi)

The “related group debt-to-asset ratio” of a U.S. shareholder for a year is the ratio between—

(A)

The related group indebtedness of the U.S. shareholder for the year (as determined under paragraph (e)(2)(ii) of this section); and

(B)

(vii)

Notwithstanding paragraph (e)(2)(i) of this section, a U.S. shareholder is considered to have no excess related group indebtedness for the year if—

(A)

Its related group indebtedness for the year does not exceed its allowable related group indebtedness for the immediately preceding year (as determined under paragraph (e)(2)(iii) of this section); or

(B)

Its related group debt-to-asset ratio (as determined under paragraph (e)(2)(vi) of this section) for the year does not exceed 0.10.

(3)

Step Two: Excess U.S. shareholder indebtedness.

(i)

The excess indebtedness of a U.S. shareholder for the year equals the amount by which its unaffiliated indebtedness for the year exceeds its allowable indebtedness for the year.

(ii)

The “unaffiliated indebtedness” of the U.S. shareholder is the average of the aggregate amounts at the beginning and end of the year of indebtedness owed by the U.S. shareholder to any obligee, other than a member of the affiliated group (as defined in § 1.861-11T(d)) of the U.S shareholder.

(iii)

The “allowable indebtedness” of a U.S. shareholder for the year equals—

(A)

The average of the aggregate values at the beginning and end of the year of the assets of the U.S. shareholder (including stock holdings in and obligations of related controlled foreign corporations, but excluding stock holdings in and obligations of members of the affiliated group (as defined in § 1.861-11T(d)) of the U.S. shareholder), reduced by the amount of the excess related group indebtedness of the U.S. shareholder for the year (as determined under Step One in paragraph (e)(2) of this section), multiplied by

(B)

The U.S. base period ratio of the U.S. shareholder for the year.

(iv)

The “U.S. base period ratio” of the U.S. shareholder for the year is the average of the debt-to-asset ratios of the U.S. shareholder for each taxable year comprising the U.S. base period for the current year (each a “base year”). For this purpose, however, the debt-to-asset ratio of the U.S. shareholder for any base year may not exceed 110 percent of the U.S. base period ratio for that base year. This limitation shall not apply with respect to any of the five taxable years chosen as initial base years by the U.S. shareholder under paragraph (e)(3)(v) of this section or with respect to any base year for which of the debt-to-asset ratio does not exceed 0.10.

(v)

(A)

The U.S. base period for any current taxable year (except as described in paragraphs (e)(3)(v) (B) and (C) of this section) shall consist of the five taxable years immediately preceding the current year.

(B)

The U.S. shareholder may choose as U.S. base periods for all of its first five taxable years for which this paragraph (e) is effective the following alternative base periods:

(1) For the first effective taxable year, the 1982, 1983, 1984, 1985 and 1986 taxable years;

(2) For the second effective taxable year, the 1983, 1984, 1985 and 1986 taxable years and the first effective taxable year;

(3) For the third effective taxable year, the 1984, 1985 and 1986 taxable years and the first and second effective taxable years;

(4) For the fourth effective taxable year, the 1985 and 1986 taxable years and the first, second and third effective taxable years; and

(5) For the fifth effective taxable year, the 1986 taxable year and the first, second, third and fourth effective taxable years.

(C)

If, however, the U.S. shareholder does not choose, under paragraph (e)(10)(ii) of this section, to apply this paragraph (e) to one or more taxable years beginning before January 1, 1992, the U.S. shareholder may not include within any U.S. base period the taxable year immediately preceding the first effective taxable year. Thus, for example, a U.S. shareholder for which the first effective taxable year is the taxable year beginning on October 1, 1992, may not include the taxable year beginning on October 1, 1991, in any U.S. base period. Assuming that the U.S. shareholder does not elect the alternative base periods described in paragraph (e)(3)(v)(B) of this section, the initial U.S. base period for the U.S. shareholder will consist of the taxable years beginning on October 1, of 1986, 1987, 1988, 1989, and 1990. The U.S. base period for the U.S. shareholder for the following taxable year, beginning on October 1, 1993, will consist of the taxable years beginning on October 1, 1987, 1988, 1989, 1990, and 1992.

(D)

If the U.S. shareholder chooses the base periods described in paragraph (e)(3)(v)(B) of this section as U.S. base periods, it must make a similar election under paragraph (e)(2)(v)(B) of this section with respect to its foreign base periods.

(vi)

The “debt-to-asset ratio” of a U.S. shareholder for a year is the ratio between—

(A)

The unaffiliated indebtedness of the U.S. shareholder for the year (as determined under paragraph (e)(3)(ii) of this section); and

(B)

The average of the aggregate values at the beginning and end of the year of the assets of the U.S. shareholder. For this purpose, the assets of the U.S. shareholder include stock holdings in and obligations of related controlled foreign corporations but do not include stock holdings in and obligations of members of the affiliated group (as defined in § 1.861-11T(d)).

(vii)

A U.S. shareholder is considered to have no excess indebtedness for the year if its debt-to-asset ratio (as determined under paragraph (e)(3)(vi) of this section) for the year does not exceed 0.10.

(4)

Step Three: Allocation of third party interest expense.

(i)

A U.S. shareholder shall allocate to its gross income in the various separate limitation categories described in section 904(d)(1) a portion of its third party interest expense incurred during the year equal in amount to the interest income derived by the U.S. shareholder during the year from allocable related group indebtedness.

(ii)

The “allocable related group indebtedness” of a U.S. shareholder for any year is an amount of related group indebtedness equal to the lesser of—

(A)

The excess related group indebtedness of the U.S. shareholder for the year (determined under Step One in paragraph (e)(2) of this section); or

(B)

The excess U.S. shareholder indebtedness for the year (determined under Step Two in paragraph (e)(3) of this section).

(iii)

The amount of interest income derived by a U.S. shareholder from allocable related group indebtedness during the year equals the total amount of interest income derived by the U.S. shareholder during the year with respect to related group indebtedness, multiplied by the ratio of allocable related group indebtedness for the year to the aggregate amount of related group indebtedness for the year.

(iv)

The portion of third party interest expense described in paragraph (e)(4)(i) of this section shall be allocated in proportion to the relative average amounts of related group indebtedness held by the U.S. shareholder in each separate limitation category during the year. The remaining portion of third party interest expense of the U.S. shareholder for the year shall be apportioned as provided in §§ 1.861-8T through 1.861-13T, excluding paragraph (e) of § 1.861-10T and this paragraph (e).

(v)

The average amount of related group indebtedness held by the U.S. shareholder in each separate limitation category during the year equals the average of the aggregate amounts of such indebtedness in each separate limitation category at the beginning and end of the year. Solely for purposes of this paragraph (e)(4), each debt obligation of a related controlled foreign corporation held by the U.S. shareholder at the beginning or end of the year is attributed to separate limitation categories in the same manner as the stock of the obligor would be attributed under the rules of § 1.861-12T(c)(3), whether or not such stock is held directly by the U.S. shareholder.

(vi)

The amount of third party interest expense of a U.S. shareholder allocated pursuant to this paragraph (e)(4) shall not exceed the total amount of the third party interest expense of the U.S. shareholder for the year (excluding any third party interest expense allocated under paragraphs (b) and (c) of § 1.861-10T).

(5)

Definitions. For purposes of this paragraph (e), the following terms shall have the following meanings.

(i)

U.S. shareholder. The term “U.S. shareholder” has the same meaning as the term “United States shareholder” when used in section 957, except that, in the case of a United States shareholder that is a member of an affiliated group (as defined in § 1.861-11T(d)), the entire affiliated group is considered to constitute a single U.S. shareholder.

(ii)

Related person. For the definition of the term “related person”, see § 1.861-8T(c)(2). A controlled foreign corporation is considered “related” to a U.S. shareholder if it is a related person with respect to the U.S. shareholder.

(6)

Determination of asset values. A U.S. shareholder shall determine the values of the assets of each related controlled foreign corporation (for purposes of Step One in paragraph (e)(2) of this section) and the assets of the U.S. shareholder (for purposes of Step Two in paragraph (e)(3) of this section) for any year in accordance with the valuation method (tax book value or fair market value) elected for that year pursuant to § 1.861-9T(g). However, solely for purposes of this paragraph (e), a U.S. shareholder may instead choose to determine the values of the assets of all related controlled foreign corporations by reference to their values as reflected on Forms 5471 (the annual information return with respect to each related controlled foreign corporation), subject to the translation rules of paragraph (e)(8)(i) of this section. This method of valuation may be used only if the taxable years of each of the related controlled foreign corporations begin with, or no more than one month earlier than, the taxable year of the U.S. shareholder. Once chosen for a taxable year, this method of valuation must be used in each subsequent taxable year and may be changed only with the consent of the Commissioner.

(7)

Adjustments to asset value. For purposes of apportioning remaining interest expense under § 1.861-9T, a U.S. shareholder shall reduce (but not below zero) the value of its assets for the year (as determined under § 1.861-9T (g) (3) or (h)) by an amount equal to the allocable related group indebtedness of the U.S. shareholder for the year (as determined under Step Three in paragraph (e)(4)(ii) of this section). This reduction is allocated among assets in each separate limitation category in proportion to the average amount of related group indebtedness held by the U.S. shareholder in each separate limitation category during the year (as determined under Step Three in paragraph (e)(4)(v) of this section).

(8)

Special rules—

(i)

Exchange rates. All indebtedness amounts and asset values (including current year and base year amounts and values) denominated in a foreign currency shall be translated into U.S. dollars at the exchange rate for the current year. The exchange rate for the current year may be determined under any reasonable method (e.g., average of month-end exchange rates for each month in the current year) if it is consistently applied to the current year and all base years. Once chosen for a taxable year, a method for determining an exchange rate must be used in each subsequent taxable year and will be treated as a method of accounting for purposes of section 446. A taxpayer may apply a different translation rule only with the prior consent of the Commissioner. In this regard, the Commissioner will be guided by the extent to which a different rule would reduce the comparability of dollar amounts of indebtedness and dollar asset values for the base years and the current year.

(ii)

Exempt assets. Solely for purposes of this paragraph (e), any exempt assets otherwise excluded under section 864(e)(3) and § 1.861-8T(d) shall be included as assets of the U.S. shareholder or related controlled foreign corporation.

(iii)

Exclusion of certain directly allocated indebtedness and assets. Qualified nonrecourse indebtedness (as defined in § 1.861-10T(b)(2)) and indebtedness incurred in connection with an integrated financial transaction (as defined in § 1.861-10T(c)(2)) shall be excluded from U.S. shareholder indebtedness and related group indebtedness. In addition, assets which are the subject of qualified nonrecourse indebtedness or integrated financial transactions shall be excluded from the assets of the U.S. shareholder and each related controlled foreign corporation.

(iv)

Exclusion of certain receivables. Receivables between related controlled foreign corporations (or between members of the affiliated group constituting the U.S. shareholder) shall be excluded from the assets of the related controlled foreign corporation (or affiliated group member) holding such receivables. See also § 1.861-11T(e)(1).

(v)

Classification of loans between controlled foreign corporations. In determining the amount of related group indebtedness for any taxable year, loans outstanding from one controlled foreign corporation to a related controlled foreign corporation are not treated as related group indebtedness. For purposes of determining the foreign base period ratio under paragraph (e)(2)(iv) of this section for a taxable year that ends on or after November 2, 2020, the rules of this paragraph (e)(8)(v) apply to determine the related group debt-to-asset ratio in each taxable year included in the foreign base period, including in taxable years that end before November 2, 2020.

(vi)

Classification of hybrid stock. In determining the amount of its related group indebtedness for any taxable year, a U.S. shareholder must not treat stock in a related controlled foreign corporation as related group indebtedness, regardless of whether the related controlled foreign corporation claims a deduction for interest under foreign law for distributions on such stock. For purposes of determining the foreign base period ratio under paragraph (e)(2)(iv) of this section for a taxable year that ends on or after December 4, 2018, the rules of this paragraph (e)(8)(vi) apply to determine the related group debt-to-asset ratio in each taxable year included in the foreign base period, including in taxable years that end before December 4, 2018.

(9)

Corporate events—

(i)

Initial acquisition of a controlled foreign corporation. If the foreign base period of the U.S. shareholder for any year includes a base year in which the U.S. shareholder did not hold stock in any related controlled foreign corporation, then, in computing the foreign base period ratio, the related group debt-to-asset ratio of the U.S. shareholder for any such base year shall be deemed to be 0.10.

(ii)

Incorporation of U.S. shareholder—

(A)

Nonapplication. This paragraph (e) does not apply to the first taxable year of the U.S. shareholder. However, this paragraph (e) does apply to all following years, including years in which later members of the affiliated group may be incorporated.

(B)

Foreign and U.S. base period ratios. In computing the foreign and U.S. base period ratios, the foreign and U.S. base periods of the U.S. shareholder shall be considered to be only the period prior to the current year that the U.S. shareholder was in existence if this prior period is less than five taxable years.

(iii)

Acquisition of additional corporations.

(A)

If a U.S. shareholder acquires (directly or indirectly) stock of a foreign or domestic corporation which, by reason of the acquisition, then becomes a related controlled foreign corporation or a member of the affiliated group, then in determining excess related group indebtedness or excess U.S. shareholder indebtedness, the indebtedness and assets of the acquired corporation shall be taken into account only at the end of the acquisition year and in following years. Thus, amounts of indebtedness and assets and the various debt-to-asset ratios of the U.S. shareholder existing at the beginning of the acquisition year or relating to preceding years are not recalculated to take account of indebtedness and assets of the acquired corporation existing as of dates before the end of the year. If, however, a major acquisition is made within the last three months of the year and a substantial distortion of values for the year would otherwise result, the taxpaper must take into account the average values of the acquired indebtedness and assets weighted to reflect the time such indebtedness is owed and such assets are held by the taxpayer during the year.

(B)

In the case of a reverse acquisition subject to this paragraph (e)(9), the rules of § 1.1502-75(d)(3) apply in determining which corporations are the acquiring and acquired corporations. For this purpose, whether corporations are affiliated is determined under § 1.861-11T(d).

(C)

If the stock of a U.S. shareholder is acquired by (and, by reason of such acquisition, the U.S. shareholder becomes affiliated with) a corporation described below, then such U.S. shareholder shall be considered to have acquired such corporation for purposes of the application of the rules of this paragraph (e). A corporation to which this paragraph (e)(9)(iii)(C) applies is—

(1) A corporation which is not affiliated with any other corporation (other than other similarly described corporation); and

(2) Substantially all of the assets of which consist of cash, securities and stock.

(iv)

Election to compute base period ratios by including acquired corporations. A U.S. shareholder may choose, solely for purposes of paragraph (e)(9) (i) and (iii) of this section, to compute its foreign and U.S. base period ratios for the acquisition year and all subsequent years by taking into account the indebtedness and asset values of the acquired corporation or corporations (including related group indebtedness owed to a former U.S. shareholder) at the beginning of the acquisition year and in each of the five base years preceding the acquisition year. This election, if made for an acquisition, must be made for all other acquisitions occurring during the same taxable year or initiated in that year and concluded in the following year.

(v)

Dispositions. If a U.S. shareholder disposes of stock of a foreign or domestic corporation which, by reason of the disposition, then ceases to be a related controlled foreign corporation or a member of the affiliated group (unless liquidated or merged into a related corporation), in determining excess related group indebtedness or excess U.S. shareholder indebtedness, the indebtedness and assets of the divested corporation shall be taken into account only at the beginning of the disposition year and for the relevant preceding years. Thus, amounts of indebtedness and assets and the various debt-to-asset ratios of the U.S. shareholder existing at the end of the year or relating to following years are not affected by indebtedness and assets of the divested corporation existing as of dates after the beginning of the year. If, however, a major disposition is made within the first three months of the year and a substantial distortion of values for the year would otherwise result, the taxpayer must take into account the average values of the divested indebtedness and assets weighted to reflect the time such indebtedness is owed and such assets are held by the taxpayer during the year.

(vi)

Election to compute base period ratios by excluding divested corporations. A U.S. shareholder may choose, solely for purposes of paragraph (e) (9) (v) and (vii) of this section, to compute its foreign and U.S. base period ratios for the disposition year and all subsequent years without taking into account the indebtedness and asset values of the divested corporation or corporations at the beginning of the disposition year and in each of the five base years preceding the disposition year. This election, if made for a disposition, must be made for all other dispositions occurring during the same taxable year or initiated in that year and concluded in the following year.

(vii)

Section 355 transactions. A U.S. corporation which becomes a separate U.S. shareholder as a result of a distribution of its stock to which section 355 applies shall be considered—

(A)

As disposed of by the U.S. shareholder of the affiliated group of which the distributing corporation is a member, with this disposition subject to the rules of paragraphs (e) (9) (v) and (vi) of this section; and

(B)

As having the same related group debt-to-asset ratio and debt-to-asset ratio as the distributing U.S. shareholder in each year preceding the year of distribution for purposes of applying this paragraph (e) to the year of distribution and subsequent years of the distributed corporation.

(10)

[Reserved]

(11)

The following example illustrates the provisions of this paragraph (e)—

(f)

Indebtedness of certain regulated utilities. If an automatically excepted regulated utility trade or business (as defined in § 1.163(j)-1(b)(15)(i)(A)) has qualified nonrecourse indebtedness within the meaning of the second sentence in § 1.163(j)-10(d)(2), interest expense from the indebtedness is directly allocated to the taxpayer's assets in the manner and to the extent provided in § 1.861-10T(b).

(g)

[Reserved]

(h)

Applicability dates. Except as provided in this paragraph (h), this section applies to taxable years ending on or after December 4, 2018. Paragraph (e)(8)(v) of this section applies to taxable years ending on or after November 2, 2020, and paragraph (f) of this section applies to taxable years beginning on or after December 28, 2021.

Notes, amendments, and revision history

Amendments

[T.D. 8410, 57 FR 13022, Apr. 15, 1992; 57 FR 28012, June 23, 1992, as amended by T.D. 9882, 84 FR 69068, Dec. 17, 2019; T.D. 9959, 87 FR 326, Jan. 4, 2022]

Authority

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, T.D. 9381, 73 FR 8604, Feb. 15, 2008, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11607, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted. RELATED RULES

Amendments

[T.D. 9169, 69 FR 78154, Dec. 29, 2004]

Amendments

[T.D. 8410, 57 FR 13022, Apr. 15, 1992; 57 FR 28012, June 23, 1992, as amended by T.D. 9882, 84 FR 69068, Dec. 17, 2019; T.D. 9959, 87 FR 326, Jan. 4, 2022]

§1.861-10T. Special allocations of interest expense (temporary).

26 C.F.R. § 1.861-10T

(a)

In general. This section applies to all taxpayers and provides three exceptions to the rules of § 1.861-9T that require the allocation and apportionment of interest expense on the basis of all assets of all members of the affiliated group. Paragraph (b) of this section describes the direct allocation of interest expense to the income generated by certain assets that are subject to qualified nonrecourse indebtedness. Paragraph (c) of this section describes the direct allocation of interest expense to income generated by certain assets that are acquired in integrated financial transaction. Paragraph (d) of this section provides special rules that are applicable to all transactions described in paragraphs (b) and (c) of this section. Paragraph (e) of this section requires the direct allocation of third party interest of an affiliated group to such group's investment in related controlled foreign corporations in cases involving excess related person indebtedness (as defined therein). See also § 1.861-9T(b)(5), which requires direct allocation of amortizable bond premium.

(b)

Qualified nonrecourse indebtedness—

(1)

In general. In the case of qualified nonrecourse indebtedness (as defined in paragraph (b)(2) of this section), the deduction for interest shall be considered directly allocable solely to the gross income which the property acquired, constructed, or improved with the proceeds of the indebtedness generates, has generated, or could reasonably be expected to generate.

(2)

Qualified nonrecourse indebtedness defined. The term “qualified nonrecourse indebtedness” means any borrowing that is not excluded by paragraph (b)(4) of this section if:

(i)

The borrowing is specifically incurred for the purpose of purchasing, constructing, or improving identified property that is either depreciable tangible personal property or real property with a useful life of more than one year or for the purpose of purchasing amortizable intangible personal property with a useful life of more than one year;

(ii)

The proceeds are actually applied to purchase, construct, or improve the identified property;

(iii)

Except as provided in paragraph (b)(7)(ii) (relating to certain third party guarantees in leveraged lease transactions), the creditor can look only to the identified property (or any lease or other interest therein) as security for payment of the principal and interest on the loan and, thus, cannot look to any other property, the borrower, or any third party with respect to repayment of principal or interest on the loan;

(iv)

The cash flow from the property, as defined in paragraph (b)(3) of this section, is reasonably expected to be sufficient in the first year of ownership as well as in each subsequent year of ownership to fulfill the terms and conditions of the loan agreement with respect to the amount and timing of payments of interest and original issue discount and periodic payments of principal in each such year; and

(v)

There are restrictions in the loan agreement on the disposal or use of the property consistent with the assumptions described in subdivisions (iii) and (iv) of this paragraph (b)(2).

(3)

Cash flow defined—

(i)

In general. The term “cash flow from the property” as used in paragraph (b)(2)(iv) of this section means a stream of revenue (as computed under paragraph (b)(3)(ii) of this section) substantially all of which derives directly from the property. The phrase “cash flow from the property” does not include revenue if a significant portion thereof is derived from activities such as sales, labor, services, or the use of other property. Thus, revenue derived from the sale or lease of inventory or of similar property does not constitute cash flow from the property, including plant or equipment used in the manufacture and sale or lease, or purchase and sale or lease, of such inventory or similar property. In addition, revenue derived in part from the performance of services that are not ancillary and subsidiary to the use of property does not constitute cash flow from the property.

(ii)

Self-constructed assets. The activities associated with self-construction of assets shall be considered to constitute labor or services for purposes of paragraph (b)(3)(i) only if the self-constructed asset—

(A)

Is constructed for the purpose of resale, or

(B)

Without regard to purpose, is sold to an unrelated person within one year from the date that the property is placed in service for purposes of section 167.

(iii)

Computation of cash flow. Cash flow is computed by subtracting cash disbursements excluding debt service from cash receipts.

(iv)

Analysis of operating costs. [Reserved]

(v)

Examples. The principles of this paragraph may be demonstrated by the following examples.

(4)

Exclusions. The term “qualified nonrecourse indebtedness” shall not include any transaction that—

(i)

Lacks economic significance within the meaning of paragraph (b)(5) of this section;

(ii)

Involves cross collateralization within the meaning of paragraph (b)(6) of this section;

(iii)

Except in the case of a leveraged lease described in paragraph (b)(7)(ii) of this section, involves credit enhancement within the meaning of paragraph (b)(7) of this section or, with respect to loans made on or after October 14, 1988, does not under the terms of the loan documents, prohibit the acquisition by the holder of bond insurance or similar forms of credit enhancement;

(iv)

Involves the purchase of inventory;

(v)

Involves the purchase of any financial asset, including stock in a corporation, an interest in a partnership or a trust, or the debt obligation of any obligor (although interest incurred in order to purchase certain financial instruments may qualify for direct allocation under paragraph (c) of this section);

(vi)

Involves interest expense that constitutes qualified residence interest as defined in section 163(h)(3); or

(vii)

[Reserved]

(5)

Economic significance. Indebtedness that otherwise qualifies under paragraph (b)(2) shall nonetheless be subject to apportionment under § 1.861-9T if, taking into account all the facts and circumstances, the transaction (including the security arrangement) lacks economic significance.

(6)

Cross collateralization. The term “cross collateralization” refers to the pledge as security for a loan of—

(i)

Any asset of the borrower other than the identified property described in paragraph (b)(2) of this section, or

(ii)

Any asset belonging to any related person, as defined in § 1.861-8T(c)(2).

(7)

Credit enhancement—

(i)

In general. Except as provided in paragraph (b)(7)(ii) of this section, the term “credit enhancement” refers to any device, including a contract, letter of credit, or guaranty, that expands the creditor's rights, directly or indirectly, beyond the identified property purchased, constructed, or improved with the funds advanced and, thus effectively provides as security for a loan the assets of any person other than the borrower. The acquisition of bond insurance or any other contract of suretyship by an initial or subsequent holder of an obligation shall constitute credit enhancement.

(ii)

Special rule for leveraged leases. For purposes of this paragraph (b), the term “credit enhancement” shall not include any device under which any person that is not a related person within the meaning of § 1.861-8T(c)(2) agrees to guarantee, without recourse to the lessor or any person related to the lessor, a lessor's payment of principal and interest on indebtedness that was incurred in order to purchase or improve an asset that is depreciable tangible personal property or depreciable tangible real property (and the land on which such real property is situated) that is leased to a lessee that is not a related person in a transaction that constitutes a lease for federal income tax purposes.

(iii)

Syndication of credit risk and sale of loan participations. The term “syndication of credit risk” refers to an arrangement in which one primary lender secures the promise of a secondary lender to bear a portion of the primary lender's credit risk on a loan. The term “sale of loan participations” refers to an arrangement in which one primary lender divides a loan into several portions, sells and assigns all rights with respect to one or more portions to participating secondary lenders, and does not remain at risk in any manner with respect to the portion assigned. For purposes of this paragraph (b), the syndication of credit risk shall constitute credit enhancement because the primary lender can look to secondary lenders for payment of the loan, notwithstanding limitations on the amount of the secondary lender's liability. Conversely, the sale of loan participations does not constitute credit enhancement, because the holder of each portion of the loan can look solely to the asset securing the loan and not to the credit or other assets of any person.

(8)

Other arrangements that do not constitute cross collateralization or credit enhancement. For purposes of paragraphs (b)(6) and (7) of this section, the following arrangements do not constitute cross collateralization or credit enhancement:

(i)

Integrated projects. A taxpayer's pledge of multiple assets of an integrated project, provided that the integrated project. An integrated project consists of functionally related and geographically contiguous assets that, as to the taxpayer, are used in the same trade or business.

(ii)

Insurance. A taxpayer's purchase of third-party casualty and liability insurance on the collateral or, by contract, bearing the risk of loss associated with destruction of the collateral or with respect to the attachment of third party liability claims.

(iii)

After-acquired property. Extension of a creditor's security interest to improvements made to the collateral, provided that the extension does not constitute excess collateralization under paragraph (b)(6), determined by taking into account the value of improvements at the time the improvements are made and the value of the original property at the time the loan was made.

(iv)

Warranties of completion and maintenance. A taxpayer's warranty to a creditor that it will complete construction or manufacture of the collateral or that it will maintain the collateral in good condition.

(v)

Substitution of collateral. A taxpayer's right to substitute collateral under any loan contract. However, after the right is exercised, the loan shall no longer constitute qualified nonrecourse indebtedness.

(9)

Refinancings. If a taxpayer refinances qualified nonrecourse indebtedness (as defined in paragraph (b)(2) of this section) with new indebtedness, such new indebtedness shall continue to qualify only if—

(i)

The principal amount of the new indebtedness does not exceed by more than five percent the remaining principal amount of the original indebtedness,

(ii)

The term of the new indebtedness does not exceed by more than six months the remaining term of the original indebtedness, and

(iii)

The requirements of this paragraph (other than those of paragraph (b)(2) (i) and (ii) of this section) are satisfied at the time of the refinancing, and the exclusions contained in this paragraph (b)(4) do not apply.

(10)

Post-construction permanent financing. Financing that is obtained after the completion of constructed property will be deemed to satisfy the requirements of paragraph (b)(2) (i) and (ii) of this section if—

(i)

The financing is obtained within one year after the constructed property or substantially all of a constructed integrated project (as defined in paragraph (b)(9)(i) of this section) is placed in service for purposes of section 167; and

(ii)

The financing does not exceed the cost of construction (including construction period interest).

(11)

Assumptions of pre-existing qualified nonrecourse indebtedness. If a transferee of property that is subject to qualified nonrecourse indebtedness assumes such indebtedness, the indebtedness shall continue to constitute qualified nonrecourse indebtedness, provided that the assumption in no way alters the qualified status of the debt.

(12)

Excess collateralization. [Reserved]

(c)

Direct allocations in the case of certain integrated financial transactions—

(1)

General rule. Interest expense incurred on funds borrowed in connection with an integrated financial transaction (as defined in paragraph (c)(2) of this section) shall be directly allocated to the income generated by the investment funded with the borrowed amounts.

(2)

Definition. The term “integrated financial transaction” refers to any transaction in which—

(i)

The taxpayer—

(A)

Incurs indebtedness for the purpose of making an identified term investment,

(B)

Identifies the indebtedness as incurred for such purpose at the time the indebtedness is incurred, and

(C)

Makes the identified term investment within ten business days after incurring the indebtedness;

(ii)

The return on the investment is reasonably expected to be sufficient throughout the term of the investment to fulfill the terms and conditions of the loan agreement with respect to the amount and timing of payments of principal and interest or original issue discount;

(iii)

The income constitutes interest or original issue discount or would constitute income equivalent to interest if earned by a controlled foreign corporation (as described in § 1.954-2T(h));

(iv)

The debt incurred and the investment mature within ten business days of each other;

(v)

The investment does not relate in any way to the operation of, and is not made in the normal course of, the trade or business of the taxpayer or any related person, including the financing of the sale of goods or the performance of services by the taxpayer or any related person, or the compensation of the taxpayer's employees (including any contribution or loan to an employee stock ownership plan (as defined in section 4975(e)(7)) or other plan that is qualified under section 401(a)); and

(vi)

The borrower does not constitute a financial services entity (as defined in section 904 and the regulations thereunder).

(3)

Rollovers. In the event that a taxpayer sells of otherwise liquidates an investment described in paragraph (c)(2) of this section, the interest expense incurred on the borrowing shall, subsequent to that liquidation, no longer qualify for direct allocation under this paragraph (c).

(4)

Examples. The principles of this paragraph (c) may be demonstrated by the following examples.

(d)

Special rules. In applying paragraphs (b) and (c) of this section, the following special rules shall apply.

(1)

Related person transactions. The rules of this section shall not apply to the extent that any transaction—

(i)

Involves either indebtedness between related persons (as defined in section § 1.861-8T(c)(2)) or indebtedness incurred from unrelated persons for the purpose of purchasing property from a related person; or

(ii)

Involves the purchase of property that is leased to a related person (as defined in § 1.861-8T(c)(2)) in a transaction described in paragraph (b) of this section. If a taxpayer purchases property and leases such property in whole or in part to a related person, a portion of the interest incurred in connection with such an acquisition, based on the ratio that the value of the property leased to the related person bears to the total value of the property, shall not qualify for direct allocation under this section.

(2)

Consideration of assets or income to which interest is directly allocated in apportioning other interest expense. In apportioning interest expense under § 1.861-9T, the year-end value of any asset to which interest expense is directly allocated under this section during the current taxable year shall be reduced to the extent provided in § 1.861-9T(g)(2)(iii) to reflect the portion of the principal amount of the indebtedness outstanding at year-end relating to the interest which is directly allocated. A similar adjustment shall be made to the end-of-year value of assets for the prior year for purposes of determining the beginning-of-year value of assets for the current year. These adjustments shall be made prior to averaging beginning-of-year and end-of-year values pursuant to § 1.861-9T(g)(2). In apportioning interest expense under the modified gross income method, gross income shall be reduced by the amount of income to which interest expense is directly allocated under this section.

(e)

Treatment of certain related group indebtedness. For further guidance, see § 1.861-10(e).

(f)

Effective/applicability date.

(1)

In general, the rules of this section apply for taxable years beginning after December 31, 1986.

(2)

Paragraphs (b)(3)(ii) (providing an operating costs test for purposes of the nonrecourse indebtedness exception) and (b)(6) (concerning excess collaterization of nonrecourse borrowings) of this section are applicable for taxable years commencing after December 31, 1988.

(3)

Paragraph (e) (concerning the treatment of related controlled foreign corporation indebtedness) of this section is applicable for taxable years commencing after December 31, 1987. For rules for taxable years beginning before January 1, 1987, and for later years to the extent permitted by § 1.861-13T, see § 1.861-8 (revised as of April 1, 1986).

Notes, amendments, and revision history

Amendments

[T.D. 8228, 53 FR 35485, Sept. 14, 1988, as amended by T.D. 9456, 74 FR 38875, Aug. 4, 2009; T.D. 9882, 84 FR 69068, Dec. 17, 2019]

Authority

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, T.D. 9381, 73 FR 8604, Feb. 15, 2008, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11607, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted. RELATED RULES

Amendments

[T.D. 9169, 69 FR 78154, Dec. 29, 2004]

Amendments

[T.D. 8228, 53 FR 35485, Sept. 14, 1988, as amended by T.D. 9456, 74 FR 38875, Aug. 4, 2009; T.D. 9882, 84 FR 69068, Dec. 17, 2019]

§1.861-11. Special rules for allocating and apportioning interest expense of an affiliated group of corporations.

26 C.F.R. § 1.861-11

(a)

In general. For further guidance, see § 1.861-11T(a).

(b)

Scope of application—

(1)

Application of section 864(e)(1) and (5) (concerning the definition and treatment of affiliated groups). Section 864(e)(1) and (5) and the portions of this section implementing section 864(e)(1) and (5) apply to the computation of foreign source taxable income for purposes of section 904 (relating to various limitations on the foreign tax credit). Section 864(e)(1) and (5) and the portions of this section implementing section 864(e)(1) and (5) also apply in connection with section 907 to determine reductions in the amount allowed as a foreign tax credit under section 901. Section 864(e)(1) and (5) and the portions of this section implementing section 864(e)(1) and (5) also apply to the computation of the combined taxable income of the related supplier and a foreign sales corporation (FSC) (under sections 921 through 927) as well as the combined taxable income of the related supplier and a domestic international sales corporation (DISC) (under sections 991 through 997).

(2)

Nonapplication of section 864(e)(1) and (5) (concerning the definition and treatment of affiliated groups). For further guidance, see § 1.861-11T(b)(2).

(c)

General rule for affiliated corporations. For further guidance, see § 1.861-11T(c).

(d)

Definition of affiliated group—

(1)

General rule. For purposes of this section, in general, the term affiliated group has the same meaning as is given that term by section 1504. Section 1504(a) defines an affiliated group as one or more chains of includible corporations connected through 80-percent stock ownership with a common parent corporation which is an includible corporation (as defined in section 1504(b)). In the case of a corporation that either becomes or ceases to be a member of the group during the course of the corporation's taxable year, only the interest expense incurred by the group member during the period of membership shall be allocated and apportioned as if all members of the group were a single corporation. In this regard, assets held during the period of membership shall be taken into account. Other interest expense incurred by the group member during its taxable year but not during the period of membership shall be allocated and apportioned without regard to the other members of the group.

(2)

[Reserved]

(d)

(3)

-(6)(i) [Reserved]. For further guidance see § 1.861-11T(d)(3) through (6)(i).

(ii)

Any foreign corporation if more than 50 percent of the gross income of such foreign corporation for the taxable year is effectively connected with the conduct of a trade or business within the United States and at least 80 percent of either the vote or value of all outstanding stock of such foreign corporation is owned directly or indirectly by members of the affiliated group (determined with regard to this sentence). This paragraph (d)(6)(ii) applies to taxable years beginning on or after July 16, 2014. See 26 CFR 1.861-11T(d)(6)(ii) (revised as of April 1, 2014) for rules applicable to taxable years beginning after August 10, 2010, and before July 16, 2014. See 26 CFR 1.861-11T(d)(6)(ii) (revised as of April 1, 2010) for rules applicable to taxable years beginning on or before August 10, 2010.

(7)

Special rules for the application of § 1.861-11T(d)(6). The attribution rules of section 1563(e) and the regulations under that section shall apply in determining indirect ownership under § 1.861-11T(d)(6). The Commissioner shall have the authority to disregard trusts, partnerships, and pass-through entities that break affiliated status. Corporations described in § 1.861-11T(d)(6) shall be considered to constitute members of an affiliated group that does not file a consolidated return and shall therefore be subject to the limitations imposed under § 1.861-11T(g). The affiliated group filing a consolidated return shall be considered to constitute a single corporation for purposes of applying the rules of § 1.861-11T(g). For taxable years beginning after December 31, 1989, § 1.861-11T(d)(6)(i) shall not apply in determining foreign source alternative minimum taxable income within each separate category and the alternative minimum tax foreign tax credit pursuant to section 59(a) to the extent that such application would result in the inclusion of a section 936 corporation within the affiliated group. This paragraph (d)(7) applies to taxable years beginning after December 31, 1986.

(e)

-(g) [Reserved]. For further guidance, see § 1.861-11T(e) through (g).

(h)

Applicability dates. This section applies to taxable years that both begin after December 31, 2017, and end on or after December 4, 2018.

Notes, amendments, and revision history

Amendments

[T.D. 8916, 66 FR 273, Jan. 3, 2001, as amended by T.D. 9676, 79 FR 41426, July 16, 2014; T.D. 9882, 84 FR 69068, Dec. 17, 2019]

Authority

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, T.D. 9381, 73 FR 8604, Feb. 15, 2008, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11607, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted. RELATED RULES

Amendments

[T.D. 9169, 69 FR 78154, Dec. 29, 2004]

Amendments

[T.D. 8916, 66 FR 273, Jan. 3, 2001, as amended by T.D. 9676, 79 FR 41426, July 16, 2014; T.D. 9882, 84 FR 69068, Dec. 17, 2019]

§1.861-11T. Special rules for allocating and apportioning interest expense of an affiliated group of corporations (temporary).

26 C.F.R. § 1.861-11T

(a)

In general. Sections 1.861-9T, 1.861-10T, 1.861-12T, and 1.861-13T provide rules that are generally applicable in apportioning interest expense. The rules of this section relate to affiliated groups of corporations and implement section 864(e) (1) and (5), which requires affiliated group allocation and apportionment of interest expense. The rules of this section apply to taxable years beginning after December 31, 1986, except as otherwise provided in § 1.861-13T. Paragraph (b) of this section describes the scope of the application of the rule for the allocation and apportionment of interest expense of affiliated groups of corporations, which is contained in paragraph (c) of this section. Paragraph (d) of this section sets forth the definition of the term “affiliated group” for purposes of this section. Paragraph (e) describes the treatment of loans between members of an affiliated group. Paragraph (f) of this section provides rules concerning the affiliated group allocation and apportionment of interest expense in computing the combined taxable income of a FSC or DISC and its related supplier. Paragraph (g) of this section describes the treatment of losses caused by apportionment of interest expense in the case of an affiliated group that does not file a consolidated return.

(b)

Scope of application—

(1)

Application of section 864(e)(1) and (5) (concerning the definition and treatment of affiliated groups). For further guidance, see § 1.861-11(b)(1).

(2)

Nonapplication of section 864(e) (1) and (5) (concerning the definition and treatment of affiliated groups). Section 864(e) (1) and (5) and the portions of this section implementing section 864(e) (1) and (5) do not apply to the computation of subpart F income of controlled foreign corporations (under sections 951 through 964), the computation of combined taxable income of a possessions corporation and its affiliates (under section 936), or the computation of effectively connected taxable income of foreign corporations. For the rules with respect to the allocation and apportionment of interest expenses of foreign corporations other than controlled foreign corporations, see §§ 1.882-4 and 1.882-5.

(c)

General rule for affiliated corporations. Except as otherwise provided in this section, the taxable income of each member of an affiliated group within each statutory grouping shall be determined by allocating and apportioning the interest expense of each member according to apportionment fractions which are computed as if all members of such group were a single corporation. For purposes of determining these apportionment fractions, stock in corporations within the affiliated group (as defined in section 864(e)(5) and the rules of this section) shall not be taken into account. In the case of an affiliated group of corporations that files a consolidated return, consolidated foreign tax credit limitations are computed for the group in accordance with the rules of § 1.1502-4. Except as otherwise provided, all the interest expense of all members of the group will be treated as definitely related and therefore allocable to all the gross income of the members of the group and all the assets of all the members of the group shall be taken into account in apportioning this interest expense. For purposes of this section, the term “taxpayer” refers to the affiliated group (regardless of whether the group files a consolidated return), rather than to the separate members thereof.

(d)

(1)

-(2) [Reserved]. For further guidance, see § 1.861-11(d)(1) and (2).

(3)

Treatment of life insurance companies subject to taxation under section 801—

(i)

General rule. A life insurance company that is subject to taxation under section 801 shall be considered to constitute a member of the affiliated group composed of companies not taxable under section 801 only if a parent corporation so elects under section 1504(c)(2)(A) of the Code. If a parent does not so elect, no adjustments shall be required with respect to such an insurance company under paragraph (g) of this section.

(ii)

Treatment of stock. Stock of a life insurance company that is subject to taxation under section 801 that is not included in an affiliated group shall be disregarded in the allocation and apportionment of the interest expense of such affiliated group.

(4)

Treatment of certain financial corporations—

(i)

In general. In the case of an affiliated group (as defined in paragraph (d)(1) of this section), any member that constitutes financial corporations as defined in paragraph (d)(4)(ii) of this section shall be treated as a separate affiliated group consisting of financial corporations (the “financial group”). The members of the group that do not constitute financial corporations shall be treated as members of a separate affiliated group consisting of nonfinancial corporations (“the nonfinancial group”).

(ii)

Financial corporation defined. The term “financial corporation” means any corporation which meets all of the following conditions:

(A)

It is described in section 581 (relating to the definition of a bank) or section 591 (relating to the deduction for dividends paid on deposits by mutual savings banks, cooperative banks, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations);

(B)

Its business is predominantly with persons other than related persons (within the meaning of section 864(d)(4) and the regulations thereunder) or their customers; and

(C)

It is required by state or Federal law to be operated separately from any other entity which is not such an institution.

(iii)

Treatment of bank holding companies. The total aggregate interest expense of any member of an affiliated group that constitutes a bank holding company subject to regulation under the Bank Holding Company Act of 1956 shall be prorated between the financial group and the nonfinancial group on the basis of the assets in the financial and nonfinancial groups. For purposes of making this proration, the assets of each member of each group, and not the stock basis in each member, shall be taken into account. Any direct or indirect subsidiary of a bank holding company that is predominantly engaged in the active conduct of a banking, financing, or similar business shall be considered to be a financial corporation for purposes of this paragraph (d)(4). The interest expense of the bank holding company must be further apportioned in accordance with § 1.861-9T(f) to the various section 904(d) categories of income contained in both the financial group and the nonfinancial group on the basis of the assets owned by each group. For purposes of computing the apportionment fractions for each group, the assets owned directly by a bank holding company within each limitation category described in section 904(d)(1) (other than stock in affiliates or assets described in § 1.861-9T(f)) shall be treated as owned pro rata by the nonfinancial group and the financial group based on the relative amounts of investments of the bank holding company in the nonfinancial group and financial group.

(iv)

Consideration of stock of the members of one group held by members of the other group. In apportioning interest expense, the nonfinancial group shall not take into account the stock of any lower-tier corporation that is treated as a member of the financial group under paragraph (d)(4)(i) of this section. Conversely, in apportioning interest expense, the financial group shall not take into account the stock of any lower-tier corporation that is treated as a member of the nonfinancial group under paragraph (d)(4)(i) of this section. For the treatment of loans between members of the financial group and members of the nonfinancial group, see paragraph (e)(1) of this section.

(5)

Example.

(i)

Facts. X, a domestic corporation which is not a bank holding company, is the parent of domestic corporations Y and Z. Z owns 100 percent of the stock Z1, which is also a domestic corporation. X, Y, Z, and Z1 were organized after January 1, 1987, and constitute an affiliated group within the meaning of paragraph (d)(1) of this section. Y and Z are financial corporations described in paragraph (d)(4) of this section. X also owns 25 percent of the stock of A, a domestic corporation. Y owns 25 percent of the voting stock of B, a foreign corporation that is not a controlled foreign corporation. Z owns less than 10 percent of the voting stock of C, another foreign corporation. The foreign source income generated by Y's or Z's direct assets is exclusively financial services income. The foreign source income generated by X's or Z1's direct assets is exclusively general limitation income. X and Z1 are not financial corporations described in paragraph (d)(4)(ii) of this section. Y and Z, therefore, constitute a separate affiliated group apart from X and Z1 for purposes of section 864(e). The combined interest expense of Y and Z of $100,000 ($50,000 each) is apportioned separately on the basis of their assets. The combined interest expense of X and Z1 of $50,000 ($25,000 each) is allocated on the basis of the assets of the XZ1 group.

(ii)

Allocation. No portion of the $50,000 deduction of the YZ group is definitely related solely to specific property within the meaning of § 1.861-10T. Thus, the YZ group's deduction for interest is related to all its activities and properties. Similarly, no portion of the $50,000 deduction of the XZ1 group is definitely related solely to specific property within the meaning of § 1.861-10T. Thus, the XZ1 group's deduction for interest is related to all its activities and properties.

(iii)

Apportionment. The YZ group would apportion its interest expense as follows:

The XZ1 group would apportion its interest expense as follows:

(6)

Certain unaffiliated corporations. Certain corporations that are not described in paragraph (d)(1) of this section will nonetheless be considered to constitute affiliated corporations for purposes of §§ 1.861-9T through 1.861-13T. These corporations include:

(i)

Any includible corporation (as defined in section 1504(b) without regard to section 1504(b)(4)) if 80 percent of either the vote or value of all outstanding stock of such corporation is owned directly or indirectly by an includible corporation or by members of an affiliated group, and

(ii)

[Reserved]. For further guidance see § 1.861-11(d)(6)(ii).

(7)

Special rules for the application of § 1.861-11T(d)(6). [Reserved]. For special rules for the application of § 1.861-11T(d)(6), see § 1.861-11(d)(7).

(e)

Loans between members of an affiliated group—

(1)

General rule. In the case of loans (including any receivable) between members of an affiliated group, as defined in paragraph (d) of this section, for purposes of apportioning interest expense, the indebtedness of the member borrower shall not be considered an asset of the member lender. However, in the case of members of separate financial and nonfinancial groups under paragraph (d)(4) of this section, the indebtedness of the member borrower shall be considered an asset of the member lender and such asset shall be characterized by reference to the member lender's income from the asset as determined under paragraph (e)(2)(ii) of this section. For purposes of this paragraph (e), the terms “related person interest income” and “related person interest payment” refer to interest paid and received by members of the same affiliated group as defined in paragraph (d) of this section.

(2)

Treatment of interest expense within the affiliated group—

(i)

General rule. A member borrower shall deduct related person interest payments in the same manner as unrelated person interest expense using group apportionment fractions computed under § 1.861-9T(f). A member lender shall include related person interest income in the same class of gross income as the class of gross income from which the member borrower deducts the related person interest payment.

(ii)

Special rule for loans between financial and nonfinancial affiliated corporations. In the case of a loan between two affiliated corporations only one of which constitutes a financial corporation under paragraph (d)(4) of this section, the member borrower shall allocate and apportion related person interest payments in the same manner as unrelated person interest expense using group apportionment fractions computed under § 1.861-9T(f). The source of the related person interest income to the member lender shall be determined under section 861(a)(1).

(iii)

Special rule for high withholding tax interest. In the case of an affiliated corporation that pays interest that is high withholding tax interest under § 1.904-5(f)(1) to another affiliated corporation, the interest expense of the payor shall be allocated to high withholding tax interest.

(3)

Back-to-back loans. If a member of the affiliated group makes a loan to a nonmember who makes a loan to a member borrower, the rule of paragraphs (e) (1) and (2) of this section shall apply, in the Commissioner's discretion, as if the member lender made the loan directly to the member borrower, provided that the loans constitute a back-to-back loan transaction. Such loans will constitute a back-to-back loan for purposes of this paragraph (e) if the loan by the nonmember would not have been made or maintained on substantially the same terms irrespective of the loan of funds by the lending member to the nonmember or other intermediary party.

(4)

Examples. The rules of this paragraph (e) may be illustrated by the following examples.

(f)

Computations of combined taxable income. In the computation of the combined taxable income of any FSC or DISC and its related supplier which is a member of an affiliated group under the pricing rules of sections 925 or 994, the combined taxable income of such FSC or DISC and its related supplier shall be reduced by the portion of the total interest expense of the affiliated group that is incurred in connection with those assets of the group used in connection with export sales involving that FSC or DISC. This amount shall be computed by multiplying the total interest expense of the affiliated group and interest expense of the FSC or DISC by a fraction the numerator of which is the assets of the affiliated group and of the FSC or DISC generating foreign trade income or gross income attributable to qualified export receipts, as the case may be, and the denominator of which is the total assets of the affiliated group and the FSC or DISC. Under this rule, interest of other group members may be attributed to the combined taxable income of a FSC or DISC and its related supplier without affecting the amount of interest otherwise deductible by the FSC or DISC, the related supplier or other member of the affiliated group. The FSC or DISC is entitled to only the statutory portion of the combined taxable income, net of any deemed interest expense, which determines the commission paid to the FSC or DISC or the transfer price of qualifying export property sold to the FSC or DISC.

(g)

Losses created through apportionment—

(1)

General rules. In the case of an affiliated group that is eligible to file, but does not file, a consolidated return and in the case of any corporation described in paragraph (d)(6) of this section, the foreign tax credits in any separate limitation category are limited to the credits computed under the rules of this paragraph (g). As a consequence of the affiliated group allocation and apportionment of interest expense required by section 864(e)(1) and this section, interest expense of a group member may be apportioned for section 904 purposes to a limitation category in which that member has no gross income, resulting in a loss in that limitation category. The same is true in connection with any expense other than interest that is subject to apportionment under the rules of section 864(e)(6) of the Code. Any reference to “interest expense” in this paragraph (g) shall be treated as including such expenses. For purposes of this paragraph, the term “limitation category” includes domestic source income, as well as the types of income described in section 904(d)(1) (A) through (I). A loss of one affiliate in a limitation category will reduce the income of another member in the same limitation category if a consolidated return is filed. (See § 1.1502-4.) If a consolidated return is not filed, this netting does not occur. Accordingly, in such a case, the following adjustments among members are required in order to give effect to the group allocation of interest expense:

(i)

Losses created through group apportionment of interest expense in one or more limitation categories within a given member must be eliminated; and

(ii)

A corresponding amount of income of other members in the same limitation category must be recharacterized.

(2)

Mechanics of computation—

(i)

Step 1: Computation of consolidated taxable income. The members of an affiliated group must first allocate and apportion all other deductible expenses other than interest. The members must then deduct from their respective gross incomes within each limitation category interest expense apportioned under the rules of § 1.861-9T(f). The taxable income of the entire affiliated group within each limitation category is then totalled.

(ii)

Step 2: Loss offset adjustments. If, after step 1, a member has losses in a given limitation category or limitation categories created through apportionment of interest expense, any such loss (i.e., the portion of such loss equal to interest expense) shall be eliminated by offsetting that loss against taxable income in other limitation categories of that member to the extent of the taxable income of other members within the same limitation category as the loss. If the member has taxable income in more than one limitation category, then the loss shall offset taxable income in all such limitation categories on a pro rata basis. If there is insufficient domestic income of the member to offset the net losses in all foreign limitation categories caused by the apportionment of interest expense, the losses in each limitation category shall be recharacterized as domestic losses to the extent of the taxable income of other members in the same respective limitation categories. After these adjustments are made, the income of the entire affiliated group within each limitation category is totalled again.

(iii)

Step 3: Determination of amount subject to recharacterization. In order to determine the amount of income to be recharacterized in step 4, the income totals computed under step 1 in each limitation category shall be subtracted from the income totals computed under step 2 in each limitation category.

(iv)

Step 4: Recharacterization. Because any differences determined under step 3 represent deviations from the consolidated totals computed under Step 1, such differences (in any limitation category) must be eliminated.

(A)

Limitation categories to be reduced. In the case of any limitation category in which there is a positive change, the income of group members with income in that limitation category must be reduced on a pro rata basis (by reference to net income figures as determined under Step 2) to the extent of such positive change (“limitation reductions”). Each member shall separately compute the sum of the limitation reductions.

(B)

Limitation categories to be increased. In any case in which only one limitation category has a negative change in Step 3, the sum of the limitation reductions within each member is added to that limitation category. In the case in which multiple limitation categories have negative changes in Step 3, the sum of the limitation reductions within each member is prorated among the negative change limitation categories based on the ratio that the negative change for the entire group in each limitation category bears to the total of all negative changes for the entire group in all limitation categories.

(3)

Examples. The following examples illustrate the principles of this paragraph.

(h)

Effective/applicability date. In general, the rules of this section apply for taxable years beginning after December 31, 1986.

Notes, amendments, and revision history

Amendments

[T.D. 8228, 53 FR 35490, Sept. 14, 1988, as amended by T.D. 8916, 65 FR 274, Jan. 3, 2001; T.D. 9456, 74 FR 38875, Aug. 4, 2009; T.D. 9571, 77 FR 2227, Jan. 17, 2012; 77 FR 9844, Feb. 21, 2012; T.D. 9676, 79 FR 41426, July 16, 2014; T.D. 9882, 84 FR 69069, Dec. 17, 2019]

Authority

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960; T.D. 9989, 89 FR 17606, Mar. 11, 2024, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, T.D. 9381, 73 FR 8604, Feb. 15, 2008, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11607, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted.

Source

Source: Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted. RELATED RULES

Amendments

[T.D. 9169, 69 FR 78154, Dec. 29, 2004]