§1293. Current taxation of income from qualified electing funds — Inbound Citations
26 U.S.C. § 1293
Cited by 20 provisions in release 119-102.
Citations to 26 U.S.C. § 1293 as a whole
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(ii) Except as provided in clause (iii), subparagraph (E)(ii), or paragraph (3)(H), the term “passive income” includes any amount includible in gross income under section 1293 (relating to certain passive foreign investment companies).
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(ii) If any foreign corporation is a noncontrolled 10-percent owned foreign corporation with respect to the taxpayer, any inclusion under section 1293 with respect to such corporation shall be treated as a dividend from such corporation.
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(H) If—(i) a passive foreign investment company is a controlled foreign corporation, and(ii) the taxpayer is a United States shareholder in such controlled foreign corporation,any amount included in gross income under section 1293 shall be treated as income in a separate category to the extent such amount is attributable to income in such category.
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(ii) section 1293 (relating to current taxation of income from qualified funds).
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(c) If, but for this subsection, an amount would be included in the gross income of a United States shareholder for any taxable year both under subsection (a)(1)(A)(i) and under section 1293 (relating to current taxation of income from certain passive foreign investment companies), such amount shall be included in the gross income of such shareholder only under subsection (a)(1)(A).
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(6) Earnings and profits of the foreign corporation attributable to any amount previously included in the gross income of such person under section 1293 with respect to the stock sold or exchanged, but only to the extent the inclusion of such amount did not result in an exclusion of an amount under section 1293(c).
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(B) the tax which would be imposed by this chapter for such year without regard to the inclusion in gross income under section 1293 of the undistributed earnings of a qualified electing fund.
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(f) For purposes of this section and section 1293, any loan by a qualified electing fund (directly or indirectly) to a shareholder of such fund shall be treated as a distribution to such shareholder.
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(2) section 1293 shall not apply with respect to such stock, and
Citations to §1293(a)
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(b) A corporation shall not be considered a regulated investment company for any taxable year unless—(1) it files with its return for the taxable year an election to be a regulated investment company or has made such election for a previous taxable year;(2) at least 90 percent of its gross income is derived from—(A) dividends, interest, payments with respect to securities loans (as defined in section 512(a)(5)), and gains from the sale or other disposition of stock or securities (as defined in section 2(a)(36) of the Investment Company Act of 1940, as amended) or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies, and(B) net income derived from an interest in a qualified publicly traded partnership (as defined in subsection (h)); and(3) at the close of each quarter of the taxable year—(A) at least 50 percent of the value of its total assets is represented by—(i) cash and cash items (including receivables), Government securities and securities of other regulated investment companies, and(ii) other securities for purposes of this calculation limited, except and to the extent provided in subsection (e), in respect of any one issuer to an amount not greater in value than 5 percent of the value of the total assets of the taxpayer and to not more than 10 percent of the outstanding voting securities of such issuer, and(B) not more than 25 percent of the value of its total assets is invested in—(i) the securities (other than Government securities or the securities of other regulated investment companies) of any one issuer,(ii) the securities (other than the securities of other regulated investment companies) of two or more issuers which the taxpayer controls and which are determined, under regulations prescribed by the Secretary, to be engaged in the same or similar trades or businesses or related trades or businesses, or(iii) the securities of one or more qualified publicly traded partnerships (as defined in subsection (h)).For purposes of paragraph (2), there shall be treated as dividends amounts included in gross income under section 951(a)(1)(A) or 1293(a) for the taxable year to the extent that, under section 959(a)(1) or 1293(c) (as the case may be), there is a distribution out of the earnings and profits of the taxable year which are attributable to the amounts so included. For purposes of paragraph (2), the Secretary may by regulation exclude from qualifying income foreign currency gains which are not directly related to the company’s principal business of investing in stock or securities (or options and futures with respect to stock or securities). For purposes of paragraph (2), amounts excludable from gross income under section 103(a) shall be treated as included in gross income. Income derived from a partnership (other than a qualified publicly traded partnership as defined in subsection (h)) or trust shall be treated as described in paragraph (2) only to the extent such income is attributable to items of income of the partnership or trust (as the case may be) which would be described in paragraph (2) if realized by the regulated investment company in the same manner as realized by the partnership or trust.
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(3) in the case of any amounts included in income under section 951(a)(1)(A) or 1293(a), the average exchange rate for the taxable year of the foreign corporation, or
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(A) the amount includible in gross income by reason of section 1293(a) for the taxable year, over
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(B) Rules similar to the rules of section 959(b) shall apply to any amount described in subparagraph (A) and to any amount included in gross income under section 1293(a) (or which would have been so included but for section 951(c)) in respect of stock which the taxpayer is treated as owning under subsection (a).
Citations to §1293(b)
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(B) For purposes of subparagraph (A), in the case of a passive foreign investment company (as defined in section 1297), each taxpayer that makes an election under section 1295 with respect to such company shall be treated in the same manner as United States shareholders under subparagraph (A), except that such taxpayer’s pro rata share with respect to the passive foreign investment company shall be determined under rules similar to the rules of section 1293(b).
Citations to §1293(c)
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(b) A corporation shall not be considered a regulated investment company for any taxable year unless—(1) it files with its return for the taxable year an election to be a regulated investment company or has made such election for a previous taxable year;(2) at least 90 percent of its gross income is derived from—(A) dividends, interest, payments with respect to securities loans (as defined in section 512(a)(5)), and gains from the sale or other disposition of stock or securities (as defined in section 2(a)(36) of the Investment Company Act of 1940, as amended) or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies, and(B) net income derived from an interest in a qualified publicly traded partnership (as defined in subsection (h)); and(3) at the close of each quarter of the taxable year—(A) at least 50 percent of the value of its total assets is represented by—(i) cash and cash items (including receivables), Government securities and securities of other regulated investment companies, and(ii) other securities for purposes of this calculation limited, except and to the extent provided in subsection (e), in respect of any one issuer to an amount not greater in value than 5 percent of the value of the total assets of the taxpayer and to not more than 10 percent of the outstanding voting securities of such issuer, and(B) not more than 25 percent of the value of its total assets is invested in—(i) the securities (other than Government securities or the securities of other regulated investment companies) of any one issuer,(ii) the securities (other than the securities of other regulated investment companies) of two or more issuers which the taxpayer controls and which are determined, under regulations prescribed by the Secretary, to be engaged in the same or similar trades or businesses or related trades or businesses, or(iii) the securities of one or more qualified publicly traded partnerships (as defined in subsection (h)).For purposes of paragraph (2), there shall be treated as dividends amounts included in gross income under section 951(a)(1)(A) or 1293(a) for the taxable year to the extent that, under section 959(a)(1) or 1293(c) (as the case may be), there is a distribution out of the earnings and profits of the taxable year which are attributable to the amounts so included. For purposes of paragraph (2), the Secretary may by regulation exclude from qualifying income foreign currency gains which are not directly related to the company’s principal business of investing in stock or securities (or options and futures with respect to stock or securities). For purposes of paragraph (2), amounts excludable from gross income under section 103(a) shall be treated as included in gross income. Income derived from a partnership (other than a qualified publicly traded partnership as defined in subsection (h)) or trust shall be treated as described in paragraph (2) only to the extent such income is attributable to items of income of the partnership or trust (as the case may be) which would be described in paragraph (2) if realized by the regulated investment company in the same manner as realized by the partnership or trust.
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(1) Foreign currency gain or loss with respect to distributions of previously taxed earnings and profits (as described in section 959 or 1293(c)) attributable to movements in exchange rates between the times of deemed and actual distribution shall be recognized and treated as ordinary income or loss from the same source as the associated income inclusion.
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(6) Earnings and profits of the foreign corporation attributable to any amount previously included in the gross income of such person under section 1293 with respect to the stock sold or exchanged, but only to the extent the inclusion of such amount did not result in an exclusion of an amount under section 1293(c).
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(B) the amount not includible in gross income by reason of section 1293(c) for such taxable year.
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(A) If a distribution is not includible in gross income for the taxable year by reason of section 1293(c), then the extension under subsection (a) for payment of the undistributed PFIC earnings tax liability with respect to the earnings to which such distribution is attributable shall expire on the last date prescribed by law (determined without regard to extensions) for filing the return of tax for such taxable year.