26 USC 904 - Limitation on credit
The total amount of the credit taken under section 901 (a) shall not exceed the same proportion of the tax against which such credit is taken which the taxpayers taxable income from sources without the United States (but not in excess of the taxpayers entire taxable income) bears to his entire taxable income for the same taxable year.
For purposes of subsection (a), the taxable income in the case of an individual, estate, or trust shall be computed without any deduction for personal exemptions under section 151 or 642 (b).
For purposes of this section
Taxable income from sources outside the United States shall include gain from the sale or exchange of capital assets only to the extent of foreign source capital gain net income.
In the case of any taxable year for which there is a capital gain rate differential
For purposes of this subsection
The term foreign source capital gain net income means the lesser of
The term foreign source net capital gain means the lesser of
The term gain from the sale or exchange of capital assets includes any gain so treated under section 1231.
There is a capital gain rate differential for any taxable year if
For purposes of subsection (a), in the case of a corporation, the taxable income shall not include any portion thereof taken into account for purposes of the credit (if any) allowed by section 936 (without regard to subsections (a)(4) and (i) thereof).
Any amount by which all taxes paid or accrued to foreign countries or possessions of the United States for any taxable year for which the taxpayer chooses to have the benefits of this subpart exceed the limitation under subsection (a) shall be deemed taxes paid or accrued to foreign countries or possessions of the United States in the first preceding taxable year and in any of the first 10 succeeding taxable years, in that order and to the extent not deemed taxes paid or accrued in a prior taxable year, in the amount by which the limitation under subsection (a) for such preceding or succeeding taxable year exceeds the sum of the taxes paid or accrued to foreign countries or possessions of the United States for such preceding or succeeding taxable year and the amount of the taxes for any taxable year earlier than the current taxable year which shall be deemed to have been paid or accrued in such preceding or subsequent taxable year (whether or not the taxpayer chooses to have the benefits of this subpart with respect to such earlier taxable year). Such amount deemed paid or accrued in any year may be availed of only as a tax credit and not as a deduction and only if the taxpayer for such year chooses to have the benefits of this subpart as to taxes paid or accrued for that year to foreign countries or possessions of the United States.
The provisions of subsections (a), (b), and (c) and sections 902, 907, and 960 shall be applied separately with respect to
For purposes of this subsection
Any reference in subclause (II) to section 922, 923, or 927 shall be treated as a reference to such section as in effect before its repeal by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000.
The term high-taxed income means any income which (but for this subparagraph) would be passive income if the sum of
exceeds the highest rate of tax specified in section 1 or 11 (whichever applies) multiplied by the amount of such income (determined with regard to section 78). For purposes of the preceding sentence, the term foreign income taxes means any income, war profits, or excess profits tax imposed by any foreign country or possession of the United States.
For purposes of this paragraph, the term export financing interest means any interest derived from financing the sale (or other disposition) for use or consumption outside the United States of any property
For purposes of clause (ii), the fair market value of any property imported into the United States shall be its appraised value, as determined by the Secretary under section 402 of the Tariff Act of 1930 (19 U.S.C. 1401a) in connection with its importation.
For purposes of this paragraph, the term related person has the meaning given such term by section 954 (d)(3), except that such section shall be applied by substituting the person with respect to whom the determination is being made for controlled foreign corporation each place it appears.
For purposes of paragraph (1)
For purposes of paragraph (1)
Except as otherwise provided in this paragraph, dividends, interest, rents, and royalties received or accrued by the taxpayer from a controlled foreign corporation in which the taxpayer is a United States shareholder shall not be treated as passive category income.
Any amount included in gross income under section 951 (a)(1)(A) shall be treated as passive category income to the extent the amount so included is attributable to passive category income.
Any interest, rent, or royalty which is received or accrued from a controlled foreign corporation in which the taxpayer is a United States shareholder shall be treated as passive category income to the extent it is properly allocable (under regulations prescribed by the Secretary) to passive category income of the controlled foreign corporation.
Any dividend paid out of the earnings and profits of any controlled foreign corporation in which the taxpayer is a United States shareholder shall be treated as passive category income in proportion to the ratio of
If a controlled foreign corporation meets the requirements of section 954 (b)(3)(A) (relating to de minimis rule) for any taxable year, for purposes of this paragraph, none of its foreign base company income (as defined in section 954 (a) without regard to section 954 (b)(5)) and none of its gross insurance income (as defined in section 954 (b)(3)(C)) for such taxable year shall be treated as passive category income, except that this sentence shall not apply to any income which (without regard to this sentence) would be treated as financial services income. Solely for purposes of applying subparagraph (D), passive income of a controlled foreign corporation shall not be treated as passive category income if the requirements of section 954 (b)(4) are met with respect to such income.
For purposes of this paragraph, the term dividend includes any amount included in gross income in section 951 (a)(1)(B). Any amount included in gross income under section 78 to the extent attributable to amounts included in gross income in section 951 (a)(1)(A) shall not be treated as a dividend but shall be treated as included in gross income under section 951 (a)(1)(A).
If
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.
For purposes of this subsection, any dividend from a noncontrolled section 902 corporation with respect to the taxpayer shall be treated as income described in a subparagraph of paragraph (1) in proportion to the ratio of
In the case of any distribution from a controlled foreign corporation to a United States shareholder, rules similar to the rules of subparagraph (A) shall apply in determining the extent to which earnings and profits of the controlled foreign corporation which are attributable to dividends received from a noncontrolled section 902 corporation may be treated as income in a separate category.
For purposes of this paragraph
For purposes of this subsection
The Secretary shall prescribe such regulations as may be necessary or appropriate for the purposes of this subsection, including regulations
For purposes of this subpart and section 936, in the case of any taxpayer who sustains an overall foreign loss for any taxable year, that portion of the taxpayers taxable income from sources without the United States for each succeeding taxable year which is equal to the lesser of
shall be treated as income from sources within the United States (and not as income from sources without the United States).
For purposes of this subsection, the term overall foreign loss means the amount by which the gross income for the taxable year from sources without the United States (whether or not the taxpayer chooses the benefits of this subpart for such taxable year) for such year is exceeded by the sum of the deductions properly apportioned or allocated thereto, except that there shall not be taken into account
to the extent such loss is not compensated for by insurance or otherwise.
For purposes of this chapter, if property which has been used predominantly without the United States in a trade or business is disposed of during any taxable year
In determining for purposes of this subparagraph whether the predominant use of any property has been without the United States, there shall be taken into account use during the 3-year period ending on the date of the disposition (or, if shorter, the period during which the property has been used in the trade or business).
Notwithstanding subparagraph (B), the term disposition does not include
For purposes of this chapter, in the case of amounts of income from sources without the United States which are treated under section 666 (without regard to subsections (b) and (c) thereof if the taxpayer chose to take a deduction with respect to the amounts described in such subsections under section 667 (d)(1)(B)) as having been distributed by a foreign trust in a preceding taxable year, that portion of such amounts equal to the amount of any overall foreign loss sustained by the beneficiary in a year prior to the taxable year of the beneficiary in which such distribution is received from the trust shall be treated as income from sources within the United States (and not income from sources without the United States) to the extent that such loss was not used under this subsection in prior taxable years, or in the current taxable year, against other income of the beneficiary.
The amount of the separate limitation losses for any taxable year shall reduce income from sources within the United States for such taxable year only to the extent the aggregate amount of such losses exceeds the aggregate amount of the separate limitation incomes for such taxable year.
The separate limitation losses for any taxable year (to the extent such losses do not exceed the separate limitation incomes for such year) shall be allocated among (and operate to reduce) such incomes on a proportionate basis.
If
such income (to the extent it does not exceed the aggregate separate limitation losses from the loss category not previously recharacterized under this subparagraph) shall be recharacterized as income from such other category in proportion to the prior reductions under subparagraph (B) in such other category not previously taken into account under this subparagraph. Nothing in the preceding sentence shall be construed as recharacterizing any tax.
Any loss from sources in the United States for any taxable year (to the extent such loss does not exceed the separate limitation incomes from such year) shall be allocated among (and operate to reduce) such incomes on a proportionate basis. This subparagraph shall be applied after subparagraph (B).
For purposes of this paragraph
If any separate limitation loss for any taxable year is allocated against any separate limitation income for such taxable year, except to the extent provided in regulations, rules similar to the rules of paragraph (3) shall apply to any disposition of property if gain from such disposition would be in the income category with respect to which there was such separate limitation loss.
For purposes of this subpart and section 936, in the case of any taxpayer who sustains an overall domestic loss for any taxable year beginning after December 31, 2006, that portion of the taxpayers taxable income from sources within the United States for each succeeding taxable year which is equal to the lesser of
shall be treated as income from sources without the United States (and not as income from sources within the United States).
For purposes of this subsection
The term overall domestic loss means
For purposes of subparagraph (A), the term domestic loss means the amount by which the gross income for the taxable year from sources within the United States is exceeded by the sum of the deductions properly apportioned or allocated thereto (determined without regard to any carryback from a subsequent taxable year).
For purposes of subparagraph (A), the term qualified taxable year means any taxable year for which the taxpayer chose the benefits of this subpart.
Any income from sources within the United States that is treated as income from sources without the United States under paragraph (1) shall be allocated among and increase the income categories in proportion to the loss from sources within the United States previously allocated to those income categories.
For purposes of this paragraph, the term income category has the meaning given such term by subsection (f)(5)(E)(i).
The Secretary shall prescribe such regulations as may be necessary to coordinate the provisions of this subsection with the provisions of subsection (f).
The following amounts which are derived from a United States-owned foreign corporation and which would be treated as derived from sources outside the United States without regard to this subsection shall, for purposes of this section, be treated as derived from sources within the United States to the extent provided in this subsection:
Any amount described in subparagraph (A) of paragraph (1) shall be treated as derived from sources within the United States to the extent such amount is attributable to income of the United States-owned foreign corporation from sources within the United States.
Any interest which
shall be treated as derived from sources within the United States.
The United States source ratio of any dividend paid or accrued by a United States-owned foreign corporation shall be treated as derived from sources within the United States.
For purposes of subparagraph (A), the term United States source ratio means, with respect to any dividend paid out of the earnings and profits for any taxable year, a fraction
Paragraph (3) shall not apply to interest paid or accrued during any taxable year (and paragraph (4) shall not apply to any dividends paid out of the earnings and profits for such taxable year) if
For purposes of the preceding sentence, earnings and profits shall be determined without any reduction for interest described in paragraph (3) (determined without regard to subparagraph (C) thereof).
For purposes of this subsection, the term United States-owned foreign corporation means any foreign corporation if 50 percent or more of
is held directly (or indirectly through applying paragraphs (2) and (3) of section 958 (a) and paragraph (4) of section 318 (a)) by United States persons (as defined in section 7701 (a)(30)).
For purposes of this subsection, the term dividend includes any gain treated as ordinary income under section 12463 or as a dividend under section 1248.
This subsection shall be applied before subsection (f).
For purposes of this subsection
If
this subsection shall not apply to such amount to the extent attributable to such item of income (but subsections (a), (b), and (c) of this section and sections 902, 907, and 960 shall be applied separately with respect to such amount to the extent so attributable).
Amounts included in gross income under section 951 (a)(1) shall be treated as a dividend under subparagraph (A)(ii) only if dividends paid by each corporation (the stock in which is taken into account in determining whether the shareholder is a United States shareholder in the United States-owned foreign corporation), if paid to the United States shareholder, would be treated under a treaty obligation of the United States as arising from sources outside the United States (applied without regard to this subsection).
The Secretary shall prescribe such regulations as may be necessary or appropriate for purposes of this subsection, including
In the case of any taxable year of an individual to which section 26 (a)(2) does not apply, for purposes of subsection (a), the tax against which the credit is taken is such tax reduced by the sum of the credits allowable under subpart A of part IV of subchapter A of this chapter (other than sections 23, 24, and 25B).
If 2 or more domestic corporations would be members of the same affiliated group if
the Secretary may by regulations provide for resourcing the income of any of such corporations or for modifications to the consolidated return regulations to the extent that such resourcing or modifications are necessary to prevent the avoidance of the provisions of this subpart.
In the case of an individual to whom this subsection applies for any taxable year
This subsection shall apply to an individual for any taxable year if
For purposes of this subsection
The term qualified passive income means any item of gross income if
The term creditable foreign taxes means any taxes for which a credit is allowable under section 901; except that such term shall not include any tax unless such tax is shown on a payee statement furnished to such individual.
The term payee statement has the meaning given to such term by section 6724 (d)(2).
This subsection shall not apply to any estate or trust.