PART VIII—SPECIAL DEDUCTIONS FOR CORPORATIONS
Editorial Notes
Amendments
2017—
2014—
1990—
1984—
1976—
1970—
1969—
1 So in original. Does not conform to section catchline.
§241. Allowance of special deductions
In addition to the deductions provided in part VI (sec. 161 and following), there shall be allowed as deductions in computing taxable income the items specified in this part.
(Aug. 16, 1954, ch. 736,
[§242. Repealed. Pub. L. 94–455, title XIX, §1901(a)(33), Oct. 4, 1976, 90 Stat. 1769 ]
Section, acts Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of
§243. Dividends received by corporations
(a) General rule
In the case of a corporation, there shall be allowed as a deduction an amount equal to the following percentages of the amount received as dividends from a domestic corporation which is subject to taxation under this chapter:
(1) 50 percent, in the case of dividends other than dividends described in paragraph (2) or (3);
(2) 100 percent, in the case of dividends received by a small business investment company operating under the Small Business Investment Act of 1958 (
(3) 100 percent, in the case of qualifying dividends (as defined in subsection (b)(1)).
(b) Qualifying dividends
(1) In general
For purposes of this section, the term "qualifying dividend" means any dividend received by a corporation—
(A) if at the close of the day on which such dividend is received, such corporation is a member of the same affiliated group as the corporation distributing such dividend, and
(B) if such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after December 31, 1963, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group.
(2) Affiliated group
For purposes of this subsection:
(A) In general
The term "affiliated group" has the meaning given such term by section 1504(a), except that for such purposes sections 1504(b)(2) and 1504(c) shall not apply.
(B) Group must be consistent in foreign tax treatment
The requirements of paragraph (1)(A) shall not be treated as being met with respect to any dividend received by a corporation if, for any taxable year which includes the day on which such dividend is received—
(i) 1 or more members of the affiliated group referred to in paragraph (1)(A) choose to any extent to take the benefits of section 901, and
(ii) 1 or more other members of such group claim to any extent a deduction for taxes otherwise creditable under section 901.
(3) Special rule for groups which include life insurance companies
(A) In general
In the case of an affiliated group which includes 1 or more insurance companies under section 801, no dividend by any member of such group shall be treated as a qualifying dividend unless an election under this paragraph is in effect for the taxable year in which the dividend is received. The preceding sentence shall not apply in the case of a dividend described in paragraph (1)(B)(ii).
(B) Effect of election
If an election under this paragraph is in effect with respect to any affiliated group—
(i) part II of subchapter B of
(ii) for purposes of this subsection, a distribution by any member of such group which is subject to tax under section 801 shall not be treated as a qualifying dividend if such distribution is out of earnings and profits for a taxable year for which an election under this paragraph is not effective and for which such distributing corporation was not a component member of a controlled group of corporations within the meaning of section 1563 solely by reason of section 1563(b)(2)(D).
(C) Election
An election under this paragraph shall be made by the common parent of the affiliated group and at such time and in such manner as the Secretary shall by regulations prescribe. Any such election shall be binding on all members of such group and may be revoked only with the consent of the Secretary.
(c) Increased percentage for dividends from 20-percent owned corporations
(1) In general
In the case of any dividend received from a 20-percent owned corporation, subsection (a)(1) shall be applied by substituting "65 percent" for "50 percent".
(2) 20-percent owned corporation
For purposes of this section, the term "20-percent owned corporation" means any corporation if 20 percent or more of the stock of such corporation (by vote and value) is owned by the taxpayer. For purposes of the preceding sentence, stock described in section 1504(a)(4) shall not be taken into account.
(d) Special rules for certain distributions
For purposes of subsection (a)—
(1) Any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.) shall not be treated as a dividend.
(2) A dividend received from a regulated investment company shall be subject to the limitations prescribed in section 854.
(3) Any dividend received from a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (section 856 and following) shall not be treated as a dividend.
(e) Certain dividends from foreign corporations
For purposes of subsection (a) and for purposes of section 245, any dividend from a foreign corporation from earnings and profits accumulated by a domestic corporation during a period with respect to which such domestic corporation was subject to taxation under this chapter (or corresponding provisions of prior law) shall be treated as a dividend from a domestic corporation which is subject to taxation under this chapter.
(Aug. 16, 1954, ch. 736,
Editorial Notes
References in Text
The Small Business Investment Act of 1958, referred to in subsec. (a)(2), is
Amendments
2018—Subsec. (b)(1)(B).
"(i) such dividend is distributed out of the earnings and profits of a taxable year of the distributing corporation which ends after December 31, 1963, for which an election under section 1562 was not in effect, and on each day of which the distributing corporation and the corporation receiving the dividend were members of such affiliated group, or
"(ii) such dividend is paid by a corporation with respect to which an election under section 936 is in effect for the taxable year in which such dividend is paid."
Subsec. (b)(2)(A).
2017—Subsec. (a)(1).
Subsec. (c).
Subsec. (c)(1).
2014—Subsec. (c)(1).
"(A) subsection (a)(1) of this section, and
"(B) subsections (a)(3) and (b)(2) of section 244,
shall be applied by substituting '80 percent' for '70 percent'."
Subsec. (d)(4).
1996—Subsec. (b)(2).
Subsec. (b)(3)(A).
1990—Subsec. (b).
1988—Subsec. (b)(6).
1987—Subsec. (a)(1).
Subsecs. (c) to (e).
1986—Subsec. (a)(1).
Subsec. (b)(3)(C).
1984—Subsec. (b)(3)(C).
Subsec. (b)(6).
1981—Subsec. (b)(3)(C)(i).
1976—Subsec. (a)(2).
Subsec. (b)(1).
Subsec. (b)(2), (3), (4).
Subsec. (b)(2)(A).
Subsec. (b)(3)(B).
Subsec. (b)(3)(C).
Subsec. (b)(5).
1975—Subsec. (b)(3)(C)(i).
1969—Subsec. (b)(3)(C)(iii).
1968—Subsec. (b)(3)(C)(v).
1964—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
1960—Subsec. (c)(3).
Subsec. (d).
1958—Subsec. (a).
Subsecs. (b), (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Effective Date of 2014 Amendment
Amendment by
Except as otherwise provided in section 221(a) of
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1990 Amendment
"(1)
"(2)
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1987 Amendment
"(1)
"(2)
Effective Date of 1986 Amendment
Amendment by section 411(b)(2)(C)(iv) of
Amendment by section 611(a)(1) of
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by
Effective Date of 1976 Amendment
For effective date of amendment by section 1031(b)(2) of
For effective date of amendment by section 1051(f)(1), (2) of
Amendment by section 1901(a)(34), (b)(1), (21) of
For effective date of amendment by section 1906(b)(3)(C)(ii) of
Effective Date of 1975 Amendment
Amendment by
Effective Date of 1969 Amendment
"(1)
"(2)
Effective Date of 1968 Amendment
Effective Date of 1964 Amendment
Effective Date of 1960 Amendment
Amendment by section 10(g) of
Effective Date of 1958 Amendment
Savings Provision
For provisions that nothing in amendment by
For provisions that nothing in amendment by
[§244. Repealed. Pub. L. 113–295, div. A, title II, §221(a)(41)(A), Dec. 19, 2014, 128 Stat. 4043 ]
Section, Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date of Repeal
Repeal not applicable to preferred stock issued before Oct. 1, 1942 (determined in the same manner as under
Except as otherwise provided in section 221(a) of
§245. Dividends received from certain foreign corporations
(a) Dividends from 10-percent owned foreign corporations
(1) In general
In the case of dividends received by a corporation from a qualified 10-percent owned foreign corporation, there shall be allowed as a deduction an amount equal to the percent (specified in section 243 for the taxable year) of the U.S.-source portion of such dividends.
(2) Qualified 10-percent owned foreign corporation
For purposes of this subsection, the term "qualified 10-percent owned foreign corporation" means any foreign corporation (other than a passive foreign investment company) if at least 10 percent of the stock of such corporation (by vote and value) is owned by the taxpayer.
(3) U.S.-source portion
For purposes of this subsection, the U.S.-source portion of any dividend is an amount which bears the same ratio to such dividend as—
(A) the post-1986 undistributed U.S. earnings, bears to
(B) the total post-1986 undistributed earnings.
(4) Post-1986 undistributed earnings
The term "post-1986 undistributed earnings" means the amount of the earnings and profits of the foreign corporation (computed in accordance with sections 964(a) and 986) accumulated in taxable years beginning after December 31, 1986—
(A) as of the close of the taxable year of the foreign corporation in which the dividend is distributed, and
(B) without diminution by reason of dividends distributed during such taxable year.
(5) Post-1986 undistributed U.S. earnings
For purposes of this subsection, the term "post-1986 undistributed U.S. earnings" means the portion of the post-1986 undistributed earnings which is attributable to—
(A) income of the qualified 10-percent owned foreign corporation which is effectively connected with the conduct of a trade or business within the United States and subject to tax under this chapter, or
(B) any dividend received (directly or through a wholly owned foreign corporation) from a domestic corporation at least 80 percent of the stock of which (by vote and value) is owned (directly or through such wholly owned foreign corporation) by the qualified 10-percent owned foreign corporation.
(6) Special rule
If the 1st day on which the requirements of paragraph (2) are met with respect to any foreign corporation is in a taxable year of such corporation beginning after December 31, 1986, the post-1986 undistributed earnings and the post-1986 undistributed U.S. earnings of such corporation shall be determined by only taking into account periods beginning on and after the 1st day of the 1st taxable year in which such requirements are met.
(7) Coordination with subsection (b)
Earnings and profits of any qualified 10-percent owned foreign corporation for any taxable year shall not be taken into account under this subsection if the deduction provided by subsection (b) would be allowable with respect to dividends paid out of such earnings and profits.
(8) Disallowance of foreign tax credit
No credit shall be allowed under section 901 for any taxes paid or accrued (or treated as paid or accrued) with respect to the United States-source portion of any dividend received by a corporation from a qualified 10-percent-owned foreign corporation.
(9) Coordination with section 904
For purposes of section 904, the U.S.-source portion of any dividend received by a corporation from a qualified 10-percent owned foreign corporation shall be treated as from sources in the United States.
(10) Coordination with treaties
If—
(A) any portion of a dividend received by a corporation from a qualified 10-percent-owned foreign corporation would be treated as from sources in the United States under paragraph (9),
(B) under a treaty obligation of the United States (applied without regard to this subsection), such portion would be treated as arising from sources outside the United States, and
(C) the taxpayer chooses the benefits of this paragraph,
this subsection shall not apply to such dividend (but subsections (a), (b), and (c) of section 904 and sections 907 and 960 shall be applied separately with respect to such portion of such dividend).
(11) Coordination with section 1248
For purposes of this subsection, the term "dividend" does not include any amount treated as a dividend under section 1248.
(12) Dividends derived from RICs and REITs ineligible for deduction
Regulated investment companies and real estate investment trusts shall not be treated as domestic corporations for purposes of paragraph (5)(B).
(b) Certain dividends received from wholly owned foreign subsidiaries
(1) In general
In the case of dividends described in paragraph (2) received from a foreign corporation by a domestic corporation which, for its taxable year in which such dividends are received, owns (directly or indirectly) all of the outstanding stock of such foreign corporation, there shall be allowed as a deduction (in lieu of the deduction provided by subsection (a)) an amount equal to 100 percent of such dividends.
(2) Eligible dividends
Paragraph (1) shall apply only to dividends which are paid out of the earnings and profits of a foreign corporation for a taxable year during which—
(A) all of its outstanding stock is owned (directly or indirectly) by the domestic corporation to which such dividends are paid; and
(B) all of its gross income from all sources is effectively connected with the conduct of a trade or business within the United States.
(3) Exception
Paragraph (1) shall not apply to any dividends if an election under section 1562 is effective for either—
(A) the taxable year of the domestic corporation in which such dividends are received, or
(B) the taxable year of the foreign corporation out of the earnings and profits of which such dividends are paid.
(c) Certain dividends received from FSC
(1) In general
In the case of a domestic corporation, there shall be allowed as a deduction an amount equal to—
(A) 100 percent of any dividend received from another corporation which is distributed out of earnings and profits attributable to foreign trade income for a period during which such other corporation was a FSC, and
(B) 50 percent (65 percent in the case of dividends from a 20-percent owned corporation as defined in section 243(c)(2)) of any dividend received from another corporation which is distributed out of earnings and profits attributable to effectively connected income received or accrued by such other corporation while such other corporation was a FSC.
(2) Exception for certain dividends
Paragraph (1) shall not apply to any dividend which is distributed out of earnings and profits attributable to foreign trade income which—
(A) is section 923(a)(2) nonexempt income (within the meaning of section 927(d)(6)), or
(B) would not, but for section 923(a)(4), be treated as exempt foreign trade income.
(3) No deduction under subsection (a) or (b)
No deduction shall be allowable under subsection (a) or (b) with respect to any dividend which is distributed out of earnings and profits of a corporation accumulated while such corporation was a FSC.
(4) Definitions
For purposes of this subsection—
(A) Foreign trade income; exempt foreign trade income
The terms "foreign trade income" and "exempt foreign trade income" have the respective meanings given such terms by section 923.
(B) Effectively connected income
The term "effectively connected income" means any income which is effectively connected (or treated as effectively connected) with the conduct of a trade or business in the United States and is subject to tax under this chapter. Such term shall not include any foreign trade income.
(C) FSC
The term "FSC" has the meaning given such term by section 922.
(5) References to prior law
Any reference in this subsection 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.
(Aug. 16, 1954, ch. 736,
Editorial Notes
References in Text
Section 1562, referred to in subsec. (b)(3), was repealed by
The FSC Repeal and Extraterritorial Income Exclusion Act of 2000, referred to in subsec. (c)(5), is
Amendments
2017—Subsec. (a)(4).
Subsec. (a)(10).
Subsec. (c)(1)(B).
2015—Subsec. (a)(12).
2007—Subsec. (c)(4)(C).
Subsec. (c)(5).
2004—Subsec. (a)(2).
1989—Subsec. (a)(8).
1988—Subsec. (a)(8).
Subsec. (a)(10), (11).
Subsec. (c).
Subsec. (d).
1987—Subsec. (c)(1)(B).
1986—Subsec. (a).
Subsec. (c)(1).
Subsec. (c)(3).
Subsec. (c)(4).
1984—Subsec. (c).
1966—Subsec. (a).
Subsecs. (b), (c).
1962—Subsec. (b).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by section 13002(b) of
Amendment by section 14301(c)(2), (3) of
Effective Date of 2015 Amendment
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by sections 1006(e)(16) and 1012(l)(2), (3) of
Effective Date of 1987 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 1876(d)(1), (j) of
Effective Date of 1984 Amendment
"(1)
"(2)
"(A) any lease of more than 3 years duration which was entered into before January 1, 1985,
"(B) any contract with respect to which the taxpayer uses the completed contract method of accounting which was entered into before January 1, 1985, or
"(C) in the case of any contract other than a lease or contract described in subparagraph (A) or (B), any contract which was entered into before January 1, 1985; except that this subparagraph shall only apply to the first 3 taxable years of the FSC ending after January 1, 1985, or such later taxable years as the Secretary of the Treasury or his delegate may prescribe.
"(3)
"(4)
Effective Date of 1966 Amendment
Amendment by
Effective Date of 1962 Amendment
Amendment by
Construction of 2015 Amendment
Dividends Received or Accrued During 1987
"(A) subparagraph (B) of section 245(c)(1) of the 1986 Code shall be applied by substituting '80 percent' for the percentage specified therein, and
"(B) subparagraph (B) of section 861(a)(2) of the 1986 Code shall be applied by substituting '100/80ths' for the fraction specified therein."
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§245A. Deduction for foreign source-portion of dividends received by domestic corporations from specified 10-percent owned foreign corporations
(a) In general
In the case of any dividend received from a specified 10-percent owned foreign corporation by a domestic corporation which is a United States shareholder with respect to such foreign corporation, there shall be allowed as a deduction an amount equal to the foreign-source portion of such dividend.
(b) Specified 10-percent owned foreign corporation
For purposes of this section—
(1) In general
The term "specified 10-percent owned foreign corporation" means any foreign corporation with respect to which any domestic corporation is a United States shareholder with respect to such corporation.
(2) Exclusion of passive foreign investment companies
Such term shall not include any corporation which is a passive foreign investment company (as defined in section 1297) with respect to the shareholder and which is not a controlled foreign corporation.
(c) Foreign-source portion
For purposes of this section—
(1) In general
The foreign-source portion of any dividend from a specified 10-percent owned foreign corporation is an amount which bears the same ratio to such dividend as—
(A) the undistributed foreign earnings of the specified 10-percent owned foreign corporation, bears to
(B) the total undistributed earnings of such foreign corporation.
(2) Undistributed earnings
The term "undistributed earnings" means the amount of the earnings and profits of the specified 10-percent owned foreign corporation (computed in accordance with sections 964(a) and 986)—
(A) as of the close of the taxable year of the specified 10-percent owned foreign corporation in which the dividend is distributed, and
(B) without diminution by reason of dividends distributed during such taxable year.
(3) Undistributed foreign earnings
The term "undistributed foreign earnings" means the portion of the undistributed earnings which is attributable to neither—
(A) income described in subparagraph (A) of section 245(a)(5), nor
(B) dividends described in subparagraph (B) of such section (determined without regard to section 245(a)(12)).
(d) Disallowance of foreign tax credit, etc.
(1) In general
No credit shall be allowed under section 901 for any taxes paid or accrued (or treated as paid or accrued) with respect to any dividend for which a deduction is allowed under this section.
(2) Denial of deduction
No deduction shall be allowed under this chapter for any tax for which credit is not allowable under section 901 by reason of paragraph (1) (determined by treating the taxpayer as having elected the benefits of subpart A of part III of subchapter N).
(e) Special rules for hybrid dividends
(1) In general
Subsection (a) shall not apply to any dividend received by a United States shareholder from a controlled foreign corporation if the dividend is a hybrid dividend.
(2) Hybrid dividends of tiered corporations
If a controlled foreign corporation with respect to which a domestic corporation is a United States shareholder receives a hybrid dividend from any other controlled foreign corporation with respect to which such domestic corporation is also a United States shareholder, then, notwithstanding any other provision of this title—
(A) the hybrid dividend shall be treated for purposes of section 951(a)(1)(A) as subpart F income of the receiving controlled foreign corporation for the taxable year of the controlled foreign corporation in which the dividend was received, and
(B) the United States shareholder shall include in gross income an amount equal to the shareholder's pro rata share (determined in the same manner as under section 951(a)(2)) of the subpart F income described in subparagraph (A).
(3) Denial of foreign tax credit, etc.
The rules of subsection (d) shall apply to any hybrid dividend received by, or any amount included under paragraph (2) in the gross income of, a United States shareholder.
(4) Hybrid dividend
The term "hybrid dividend" means an amount received from a controlled foreign corporation—
(A) for which a deduction would be allowed under subsection (a) but for this subsection, and
(B) for which the controlled foreign corporation received a deduction (or other tax benefit) with respect to any income, war profits, or excess profits taxes imposed by any foreign country or possession of the United States.
(f) Special rule for purging distributions of passive foreign investment companies
Any amount which is treated as a dividend under section 1291(d)(2)(B) shall not be treated as a dividend for purposes of this section.
(g) Regulations
The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section, including regulations for the treatment of United States shareholders owning stock of a specified 10 percent 1 owned foreign corporation through a partnership.
(Added
Statutory Notes and Related Subsidiaries
Effective Date
1 So in original. Probably should be "10-percent".
§246. Rules applying to deductions for dividends received
(a) Deduction not allowed for dividends from certain corporations
(1) In general
The deductions allowed by sections 243 1 245, and 245A shall not apply to any dividend from a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers' cooperative associations).
(2) Subsection not to apply to certain dividends of Federal Home Loan Banks
(A) Dividends out of current earnings and profits
In the case of any dividend paid by any FHLB out of earnings and profits of the FHLB for the taxable year in which such dividend was paid, paragraph (1) shall not apply to that portion of such dividend which bears the same ratio to the total dividend as—
(i) the dividends received by the FHLB from the FHLMC during such taxable year, bears to
(ii) the total earnings and profits of the FHLB for such taxable year.
(B) Dividends out of accumulated earnings and profits
In the case of any dividend which is paid out of any accumulated earnings and profits of any FHLB, paragraph (1) shall not apply to that portion of the dividend which bears the same ratio to the total dividend as—
(i) the amount of dividends received by such FHLB from the FHLMC which are out of earnings and profits of the FHLMC—
(I) for taxable years ending after December 31, 1984, and
(II) which were not previously treated as distributed under subparagraph (A) or this subparagraph, bears to
(ii) the total accumulated earnings and profits of the FHLB as of the time such dividend is paid.
For purposes of clause (ii), the accumulated earnings and profits of the FHLB as of January 1, 1985, shall be treated as equal to its retained earnings as of such date.
(C) Coordination with section 243
To the extent that paragraph (1) does not apply to any dividend by reason of subparagraph (A) or (B) of this paragraph, the requirement contained in section 243(a) that the corporation paying the dividend be subject to taxation under this chapter shall not apply.
(D) Definitions
For purposes of this paragraph—
(i) FHLB
The term "FHLB" means any Federal Home Loan Bank.
(ii) FHLMC
The term "FHLMC" means the Federal Home Loan Mortgage Corporation.
(iii) Taxable year of FHLB
The taxable year of an FHLB shall, except as provided in regulations prescribed by the Secretary, be treated as the calendar year.
(iv) Earnings and profits
The earnings and profits of any FHLB for any taxable year shall be treated as equal to the sum of—
(I) any dividends received by the FHLB from the FHLMC during such taxable year, and
(II) the total earnings and profits (determined without regard to dividends described in subclause (I)) of the FHLB as reported in its annual financial statement prepared in accordance with section 20 of the Federal Home Loan Bank Act (
(b) Limitation on aggregate amount of deductions
(1) General rule
Except as provided in paragraph (2), the aggregate amount of the deductions allowed by section 243(a)(1), subsection 2 (a) and 2 (b) of section 245, and section 250 shall not exceed the percentage determined under paragraph (3) of the taxable income computed without regard to the deductions allowed by sections 172, 199A, 243(a)(1), subsection 2 (a) and 2 (b) of section 245, and 250, without regard to any adjustment under section 1059, and without regard to any capital loss carryback to the taxable year under section 1212(a)(1).
(2) Effect of net operating loss
Paragraph (1) shall not apply for any taxable year for which there is a net operating loss (as determined under section 172).
(3) Special rules
The provisions of paragraph (1) shall be applied—
(A) first separately with respect to dividends from 20-percent owned corporations (as defined in section 243(c)(2)) and the percentage determined under this paragraph shall be 65 percent, and
(B) then separately with respect to dividends not from 20-percent owned corporations and the percentage determined under this paragraph shall be 50 percent and the taxable income shall be reduced by the aggregate amount of dividends from 20-percent owned corporations (as so defined).
(c) Exclusion of certain dividends
(1) In general
No deduction shall be allowed under section 243 1 245, or 245A, in respect of any dividend on any share of stock—
(A) which is held by the taxpayer for 45 days or less during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend, or
(B) to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property.
(2) 90-day rule in the case of certain preference dividends
In the case of stock having preference in dividends, if the taxpayer receives dividends with respect to such stock which are attributable to a period or periods aggregating in excess of 366 days, paragraph (1)(A) shall be applied—
(A) by substituting "90 days" for "45 days" each place it appears, and
(B) by substituting "181-day period" for "91-day period".
(3) Determination of holding periods
For purposes of this subsection, in determining the period for which the taxpayer has held any share of stock—
(A) the day of disposition, but not the day of acquisition, shall be taken into account, and
(B) paragraph (3) of section 1223 shall not apply.
(4) Holding period reduced for periods where risk of loss diminished
The holding periods determined for purposes of this subsection shall be appropriately reduced (in the manner provided in regulations prescribed by the Secretary) for any period (during such periods) in which—
(A) the taxpayer has an option to sell, is under a contractual obligation to sell, or has made (and not closed) a short sale of, substantially identical stock or securities,
(B) the taxpayer is the grantor of an option to buy substantially identical stock or securities, or
(C) under regulations prescribed by the Secretary, a taxpayer has diminished his risk of loss by holding 1 or more other positions with respect to substantially similar or related property.
The preceding sentence shall not apply in the case of any qualified covered call (as defined in section 1092(c)(4) but without regard to the requirement that gain or loss with respect to the option not be ordinary income or loss), other than a qualified covered call option to which section 1092(f) applies.
(5) Special rules for foreign source portion of dividends received from specified 10-percent owned foreign corporations
(A) 1-year holding period requirement
For purposes of section 245A—
(i) paragraph (1)(A) shall be applied—
(I) by substituting "365 days" for "45 days" each place it appears, and
(II) by substituting "731-day period" for "91-day period", and
(ii) paragraph (2) shall not apply.
(B) Status must be maintained during holding period
For purposes of applying paragraph (1) with respect to section 245A, the taxpayer shall be treated as holding the stock referred to in paragraph (1) for any period only if—
(i) the specified 10-percent owned foreign corporation referred to in section 245A(a) is a specified 10-percent owned foreign corporation at all times during such period, and
(ii) the taxpayer is a United States shareholder with respect to such specified 10-percent owned foreign corporation at all times during such period.
(d) Dividends from a DISC or former DISC
No deduction shall be allowed under section 243 in respect of a dividend from a corporation which is a DISC or former DISC (as defined in section 992(a)) to the extent such dividend is paid out of the corporation's accumulated DISC income or previously taxed income, or is a deemed distribution pursuant to section 995(b)(1).
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2018—Subsec. (e).
2017—Subsec. (a)(1).
Subsec. (b)(1).
Subsec. (b)(3)(A).
Subsec. (b)(3)(B).
Subsec. (c)(1).
Subsec. (c)(5).
2014—Subsec. (a)(1).
Subsec. (b)(1).
Subsec. (c)(1).
2005—Subsec. (c)(3)(B).
2004—Subsec. (b)(1).
Subsec. (c)(1)(A).
Subsec. (c)(2)(B).
Subsec. (c)(4).
1997—Subsec. (c)(1)(A).
Subsec. (c)(2).
Subsec. (c)(3).
1996—Subsec. (f).
1988—Subsec. (c)(1)(A).
1987—Subsec. (b)(1).
Subsec. (b)(3).
1986—Subsec. (a)(2)(B).
Subsec. (a)(2)(C), (D).
Subsec. (b)(1).
Subsec. (c)(1)(A).
Subsec. (c)(4).
Subsec. (e).
1984—Subsec. (a).
Subsec. (b)(1).
Subsec. (c)(1)(A).
Subsec. (c)(1)(B).
Subsec. (c)(2).
Subsec. (c)(3).
Subsec. (c)(3)(B).
Subsec. (c)(4).
1982—Subsecs. (e), (f).
1976—Subsec. (a).
Subsec. (c)(3).
1971—Subsecs. (d), (e).
1969—Subsec. (b)(1).
Subsec. (d).
1964—Subsec. (b).
1958—Subsec. (b)(1).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by section 11011(d)(2) of
Amendment by section 13002(c) of
Amendment by section 13305(b)(1) of
Amendment by section 14101(b), (c)(1) of
Amendment by section 14202(b)(2) of
Effective Date of 2014 Amendment
Amendment by
Except as otherwise provided in section 221(a) of
Effective Date of 2005 Amendment
Amendment by
Effective Date of 2004 Amendments
Amendment by section 102(d)(4) of
Amendment by
Effective Date of 1997 Amendment
"(1)
"(2)
"(A) the dividend is paid with respect to stock held by the taxpayer on June 8, 1997, and all times thereafter until the dividend is received,
"(B) such stock is continuously subject to a position described in section 246(c)(4) of the Internal Revenue Code of 1986 on June 8, 1997, and all times thereafter until the dividend is received, and
"(C) such stock and position are clearly identified in the taxpayer's records within 30 days after the date of the enactment of this Act.
Stock shall not be treated as meeting the requirement of subparagraph (B) if the position is sold, closed, or otherwise terminated and reestablished."
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by
Effective Date of 1986 Amendment
"(1)
"(2)
Amendment by section 1275(a)(2)(B) of
Amendment by section 1812(d)(1) of
Effective Date of 1984 Amendment
Amendment by section 53(d)(2) of
Amendment by section 177(b) of
Amendment by section 801(b)(2)(A) of
Effective Date of 1982 Amendment
"(1)
"(2)
"(3)
Effective Date of 1976 Amendment
For effective date of amendment by section 1051(f)(3) of
Amendment by section 1906(b)(13)(A) of
Effective Date of 1971 Amendment
Amendment by
Effective Date of 1969 Amendment
Amendment by section 512(f)(3) of
Effective Date of 1964 Amendment
Amendment by
Effective Date of 1958 Amendment
Amendment by section 57(c)(2) of
Savings Provision
For provisions that nothing in amendment by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
1 So in original. Probably should be followed by a comma.
§246A. Dividends received deduction reduced where portfolio stock is debt financed
(a) General rule
In the case of any dividend on debt-financed portfolio stock, there shall be substituted for the percentage which (but for this subsection) would be used in determining the amount of the deduction allowable under section 243 or 245(a) a percentage equal to the product of—
(1) 50 percent (65 percent in the case of any dividend from a 20-percent owned corporation as defined in section 243(c)(2)), and
(2) 100 percent minus the average indebtedness percentage.
(b) Section not to apply to dividends for which 100 percent dividends received deduction allowable
Subsection (a) shall not apply to—
(1) qualifying dividends (as defined in section 243(b)), and
(2) dividends received by a small business investment company operating under the Small Business Investment Act of 1958.
(c) Debt financed portfolio stock
For purposes of this section—
(1) In general
The term "debt financed portfolio stock" means any portfolio stock if at some time during the base period there is portfolio indebtedness with respect to such stock.
(2) Portfolio stock
The term "portfolio stock" means any stock of a corporation unless—
(A) as of the beginning of the ex-dividend date, the taxpayer owns stock of such corporation—
(i) possessing at least 50 percent of the total voting power of the stock of such corporation, and
(ii) having a value equal to at least 50 percent of the total value of the stock of such corporation, or
(B) as of the beginning of the ex-dividend date—
(i) the taxpayer owns stock of such corporation which would meet the requirements of subparagraph (A) if "20 percent" were substituted for "50 percent" each place it appears in such subparagraph, and
(ii) stock meeting the requirements of subparagraph (A) is owned by 5 or fewer corporate shareholders.
(3) Special rule for stock in a bank or bank holding company
(A) In general
If, as of the beginning of the ex-dividend date, the taxpayer owns stock of any bank or bank holding company having a value equal to at least 80 percent of the total value of the stock of such bank or bank holding company, for purposes of paragraph (2)(A)(i), the taxpayer shall be treated as owning any stock of such bank or bank holding company which the taxpayer has an option to acquire.
(B) Definitions
For purposes of subparagraph (A)—
(i) Bank
The term "bank" has the meaning given such term by section 581.
(ii) Bank holding company
The term "bank holding company" means a bank holding company (within the meaning of section 2(a) of the Bank Holding Company Act of 1956).
(4) Treatment of certain preferred stock
For purposes of determining whether the requirements of subparagraph (A) or (B) of paragraph (2) or of subparagraph (A) of paragraph (3) are met, stock described in section 1504(a)(4) shall not be taken into account.
(d) Average indebtedness percentage
For purposes of this section—
(1) In general
Except as provided in paragraph (2), the term "average indebtedness percentage" means the percentage obtained by dividing—
(A) the average amount (determined under regulations prescribed by the Secretary) of the portfolio indebtedness with respect to the stock during the base period, by
(B) the average amount (determined under regulations prescribed by the Secretary) of the adjusted basis of the stock during the base period.
(2) Special rule where stock not held throughout base period
In the case of any stock which was not held by the taxpayer throughout the base period, paragraph (1) shall be applied as if the base period consisted only of that portion of the base period during which the stock was held by the taxpayer.
(3) Portfolio indebtedness
(A) In general
The term "portfolio indebtedness" means any indebtedness directly attributable to investment in the portfolio stock.
(B) Certain amounts received from short sale treated as indebtedness
For purposes of subparagraph (A), any amount received from a short sale shall be treated as indebtedness for the period beginning on the day on which such amount is received and ending on the day the short sale is closed.
(4) Base period
The term "base period" means, with respect to any dividend, the shorter of—
(A) the period beginning on the ex-dividend date for the most recent previous dividend on the stock and ending on the day before the ex-dividend date for the dividend involved, or
(B) the 1-year period ending on the day before the ex-dividend date for the dividend involved.
(e) Reduction in dividends received deduction not to exceed allocable interest
Under regulations prescribed by the Secretary, any reduction under this section in the amount allowable as a deduction under section 243 or 245 with respect to any dividend shall not exceed the amount of any interest deduction (including any deductible short sale expense) allocable to such dividend.
(f) Regulations
The regulations prescribed for purposes of this section under section 7701(f) shall include regulations providing for the disallowance of interest deductions or other appropriate treatment (in lieu of reducing the dividend received deduction) where the obligor of the indebtedness is a person other than the person receiving the dividend.
(Added
Editorial Notes
References in Text
The Small Business Investment Act of 1958, referred to in subsec. (b)(2), is
Section 2(a) of the Bank Holding Company Act of 1956, referred to in subsec. (c)(3)(B)(ii), is classified to
Amendments
2018—Subsec. (b)(1).
2017—Subsec. (a)(1).
2014—Subsecs. (a), (e).
2004—Subsec. (b)(1).
1988—Subsec. (a).
1987—Subsec. (a)(1).
1986—Subsec. (a).
Subsec. (a)(1).
Statutory Notes and Related Subsidiaries
Effective Date of 2017 Amendment
Amendment by
Effective Date of 2014 Amendment
Amendment by
Except as otherwise provided in section 221(a) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1987 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 611(a)(4) of
Amendment by section 1804(a) of
Effective Date
Savings Provision
For provisions that nothing in amendment by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§247. Contributions to Alaska Native Settlement Trusts
(a) In general
In the case of a Native Corporation, there shall be allowed a deduction for any contributions made by such Native Corporation to a Settlement Trust (regardless of whether an election under section 646 is in effect for such Settlement Trust) for which the Native Corporation has made an annual election under subsection (e).
(b) Amount of deduction
The amount of the deduction under subsection (a) shall be equal to—
(1) in the case of a cash contribution (regardless of the method of payment, including currency, coins, money order, or check), the amount of such contribution, or
(2) in the case of a contribution not described in paragraph (1), the lesser of—
(A) the Native Corporation's adjusted basis in the property contributed, or
(B) the fair market value of the property contributed.
(c) Limitation and carryover
(1) In general
Subject to paragraph (2), the deduction allowed under subsection (a) for any taxable year shall not exceed the taxable income (as determined without regard to such deduction) of the Native Corporation for the taxable year in which the contribution was made.
(2) Carryover
If the aggregate amount of contributions described in subsection (a) for any taxable year exceeds the limitation under paragraph (1), such excess shall be treated as a contribution described in subsection (a) in each of the 15 succeeding years in order of time.
(d) Definitions
For purposes of this section, the terms "Native Corporation" and "Settlement Trust" have the same meaning given such terms under section 646(h).
(e) Manner of making election
(1) In general
For each taxable year, a Native Corporation may elect to have this section apply for such taxable year on the income tax return or an amendment or supplement to the return of the Native Corporation, with such election to have effect solely for such taxable year.
(2) Revocation
Any election made by a Native Corporation pursuant to this subsection may be revoked pursuant to a timely filed amendment or supplement to the income tax return of such Native Corporation.
(f) Additional rules
(1) Earnings and profits
Notwithstanding section 646(d)(2), in the case of a Native Corporation which claims a deduction under this section for any taxable year, the earnings and profits of such Native Corporation for such taxable year shall be reduced by the amount of such deduction.
(2) Gain or loss
No gain or loss shall be recognized by the Native Corporation with respect to a contribution of property for which a deduction is allowed under this section.
(3) Income
Subject to subsection (g), a Settlement Trust shall include in income the amount of any deduction allowed under this section in the taxable year in which the Settlement Trust actually receives such contribution.
(4) Period
The holding period under section 1223 of the Settlement Trust shall include the period the property was held by the Native Corporation.
(5) Basis
The basis that a Settlement Trust has for which a deduction is allowed under this section shall be equal to the lesser of—
(A) the adjusted basis of the Native Corporation in such property immediately before such contribution, or
(B) the fair market value of the property immediately before such contribution.
(6) Prohibition
No deduction shall be allowed under this section with respect to any contributions made to a Settlement Trust which are in violation of subsection (a)(2) or (c)(2) of section 39 of the Alaska Native Claims Settlement Act (
(g) Election by Settlement Trust to defer income recognition
(1) In general
In the case of a contribution which consists of property other than cash, a Settlement Trust may elect to defer recognition of any income related to such property until the sale or exchange of such property, in whole or in part, by the Settlement Trust.
(2) Treatment
In the case of property described in paragraph (1), any income or gain realized on the sale or exchange of such property shall be treated as—
(A) for such amount of the income or gain as is equal to or less than the amount of income which would be included in income at the time of contribution under subsection (f)(3) but for the taxpayer's election under this subsection, ordinary income, and
(B) for any amounts of the income or gain which are in excess of the amount of income which would be included in income at the time of contribution under subsection (f)(3) but for the taxpayer's election under this subsection, having the same character as if this subsection did not apply.
(3) Election
(A) In general
For each taxable year, a Settlement Trust may elect to apply this subsection for any property described in paragraph (1) which was contributed during such year. Any property to which the election applies shall be identified and described with reasonable particularity on the income tax return or an amendment or supplement to the return of the Settlement Trust, with such election to have effect solely for such taxable year.
(B) Revocation
Any election made by a Settlement Trust pursuant to this subsection may be revoked pursuant to a timely filed amendment or supplement to the income tax return of such Settlement Trust.
(C) Certain dispositions
(i) In general
In the case of any property for which an election is in effect under this subsection and which is disposed of within the first taxable year subsequent to the taxable year in which such property was contributed to the Settlement Trust—
(I) this section shall be applied as if the election under this subsection had not been made,
(II) any income or gain which would have been included in the year of contribution under subsection (f)(3) but for the taxpayer's election under this subsection shall be included in income for the taxable year of such contribution, and
(III) the Settlement Trust shall pay any increase in tax resulting from such inclusion, including any applicable interest, and increased by 10 percent of the amount of such increase with interest.
(ii) Assessment
Notwithstanding section 6501(a), any amount described in subclause (III) of clause (i) may be assessed, or a proceeding in court with respect to such amount may be initiated without assessment, within 4 years after the date on which the return making the election under this subsection for such property was filed.
(Added
Editorial Notes
Prior Provisions
A prior section 247, Aug. 16, 1954, ch. 736,
Statutory Notes and Related Subsidiaries
Effective Date
"(A)
"(B)
§248. Organizational expenditures
(a) Election to deduct
If a corporation elects the application of this subsection (in accordance with regulations prescribed by the Secretary) with respect to any organizational expenditures—
(1) the corporation shall be allowed a deduction for the taxable year in which the corporation begins business in an amount equal to the lesser of—
(A) the amount of organizational expenditures with respect to the taxpayer, or
(B) $5,000, reduced (but not below zero) by the amount by which such organizational expenditures exceed $50,000, and
(2) the remainder of such organizational expenditures shall be allowed as a deduction ratably over the 180-month period beginning with the month in which the corporation begins business.
(b) Organizational expenditures defined
The term "organizational expenditures" means any expenditure which—
(1) is incident to the creation of the corporation;
(2) is chargeable to capital account; and
(3) is of a character which, if expended incident to the creation of a corporation having a limited life, would be amortizable over such life.
(c) Time for and scope of election
The election provided by subsection (a) may be made for any taxable year but only if made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). The period so elected shall be adhered to in computing the taxable income of the corporation for the taxable year for which the election is made and all subsequent taxable years.
(Aug. 16, 1954, ch. 736,
Editorial Notes
Amendments
2014—Subsec. (c).
2004—Subsec. (a).
1976—Subsec. (a).
Subsec. (c).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by section 1901(a)(36) of
Amendment by section 1906(b)(13)(A) of
§249. Limitation on deduction of bond premium on repurchase
(a) General rule
No deduction shall be allowed to the issuing corporation for any premium paid or incurred upon the repurchase of a bond, debenture, note, or certificate or other evidence of indebtedness which is convertible into the stock of the issuing corporation, or a corporation in the same parent-subsidiary controlled group (within the meaning of section 1563(a)(1)) as the issuing corporation, to the extent the repurchase price exceeds an amount equal to the adjusted issue price plus a normal call premium on bonds or other evidences of indebtedness which are not convertible. The preceding sentence shall not apply to the extent that the corporation can demonstrate to the satisfaction of the Secretary that such excess is attributable to the cost of borrowing and is not attributable to the conversion feature.
(b) Adjusted issue price
For purposes of subsection (a), the adjusted issue price is the issue price (as defined in sections 1273(b) and 1274) increased by any amount of discount deducted before repurchase, or decreased by any amount of premium included in gross income before repurchase by the issuing corporation.
(Added
Editorial Notes
Amendments
2014—Subsec. (a).
Subsec. (b).
2012—Subsec. (a).
Subsec. (b).
1984—Subsec. (b)(1).
1976—Subsec. (a).
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by section 221(a)(43) of
Effective Date of 2012 Amendment
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by
Effective Date
§250. Foreign-derived intangible income and global intangible low-taxed income
(a) Allowance of deduction
(1) In general
In the case of a domestic corporation for any taxable year, there shall be allowed as a deduction an amount equal to the sum of—
(A) 37.5 percent of the foreign-derived intangible income of such domestic corporation for such taxable year, plus
(B) 50 percent of—
(i) the global intangible low-taxed income amount (if any) which is included in the gross income of such domestic corporation under section 951A for such taxable year, and
(ii) the amount treated as a dividend received by such corporation under section 78 which is attributable to the amount described in clause (i).
(2) Limitation based on taxable income
(A) In general
If, for any taxable year—
(i) the sum of the foreign-derived intangible income and the global intangible low-taxed income amount otherwise taken into account by the domestic corporation under paragraph (1), exceeds
(ii) the taxable income of the domestic corporation (determined without regard to this section),
then the amount of the foreign-derived intangible income and the global intangible low-taxed income amount so taken into account shall be reduced as provided in subparagraph (B).
(B) Reduction
For purposes of subparagraph (A)—
(i) foreign-derived intangible income shall be reduced by an amount which bears the same ratio to the excess described in subparagraph (A) as such foreign-derived intangible income bears to the sum described in subparagraph (A)(i), and
(ii) the global intangible low-taxed income amount shall be reduced by the remainder of such excess.
(3) Reduction in deduction for taxable years after 2025
In the case of any taxable year beginning after December 31, 2025, paragraph (1) shall be applied by substituting—
(A) "21.875 percent" for "37.5 percent" in subparagraph (A), and
(B) "37.5 percent" for "50 percent" in subparagraph (B).
(b) Foreign-derived intangible income
For purposes of this section—
(1) In general
The foreign-derived intangible income of any domestic corporation is the amount which bears the same ratio to the deemed intangible income of such corporation as—
(A) the foreign-derived deduction eligible income of such corporation, bears to
(B) the deduction eligible income of such corporation.
(2) Deemed intangible income
For purposes of this subsection—
(A) In general
The term "deemed intangible income" means the excess (if any) of—
(i) the deduction eligible income of the domestic corporation, over
(ii) the deemed tangible income return of the corporation.
(B) Deemed tangible income return
The term "deemed tangible income return" means, with respect to any corporation, an amount equal to 10 percent of the corporation's qualified business asset investment (as defined in section 951A(d), determined by substituting "deduction eligible income" for "tested income" in paragraph (2) thereof and without regard to whether the corporation is a controlled foreign corporation).
(3) Deduction eligible income
(A) In general
The term "deduction eligible income" means, with respect to any domestic corporation, the excess (if any) of—
(i) gross income of such corporation determined without regard to—
(I) any amount included in the gross income of such corporation under section 951(a)(1),
(II) the global intangible low-taxed income included in the gross income of such corporation under section 951A,
(III) any financial services income (as defined in section 904(d)(2)(D)) of such corporation,
(IV) any dividend received from a corporation which is a controlled foreign corporation of such domestic corporation,
(V) any domestic oil and gas extraction income of such corporation, and
(VI) any foreign branch income (as defined in section 904(d)(2)(J)), over
(ii) the deductions (including taxes) properly allocable to such gross income.
(B) Domestic oil and gas extraction income
For purposes of subparagraph (A), the term "domestic oil and gas extraction income" means income described in section 907(c)(1), determined by substituting "within the United States" for "without the United States".
(4) Foreign-derived deduction eligible income
The term "foreign-derived deduction eligible income" means, with respect to any taxpayer for any taxable year, any deduction eligible income of such taxpayer which is derived in connection with—
(A) property—
(i) which is sold by the taxpayer to any person who is not a United States person, and
(ii) which the taxpayer establishes to the satisfaction of the Secretary is for a foreign use, or
(B) services provided by the taxpayer which the taxpayer establishes to the satisfaction of the Secretary are provided to any person, or with respect to property, not located within the United States.
(5) Rules relating to foreign use property or services
For purposes of this subsection—
(A) Foreign use
The term "foreign use" means any use, consumption, or disposition which is not within the United States.
(B) Property or services provided to domestic intermediaries
(i) Property
If a taxpayer sells property to another person (other than a related party) for further manufacture or other modification within the United States, such property shall not be treated as sold for a foreign use even if such other person subsequently uses such property for a foreign use.
(ii) Services
If a taxpayer provides services to another person (other than a related party) located within the United States, such services shall not be treated as described in paragraph (4)(B) even if such other person uses such services in providing services which are so described.
(C) Special rules with respect to related party transactions
(i) Sales to related parties
If property is sold to a related party who is not a United States person, such sale shall not be treated as for a foreign use unless—
(I) such property is ultimately sold by a related party, or used by a related party in connection with property which is sold or the provision of services, to another person who is an unrelated party who is not a United States person, and
(II) the taxpayer establishes to the satisfaction of the Secretary that such property is for a foreign use.
For purposes of this clause, a sale of property shall be treated as a sale of each of the components thereof.
(ii) Service provided to related parties
If a service is provided to a related party who is not located in the United States, such service shall not be treated described 1 in subparagraph (A)(ii) 2 unless the taxpayer established to the satisfaction of the Secretary that such service is not substantially similar to services provided by such related party to persons located within the United States.
(D) Related party
For purposes of this paragraph, the term "related party" means any member of an affiliated group as defined in section 1504(a), determined—
(i) by substituting "more than 50 percent" for "at least 80 percent" each place it appears, and
(ii) without regard to paragraphs (2) and (3) of section 1504(b).
Any person (other than a corporation) shall be treated as a member of such group if such person is controlled by members of such group (including any entity treated as a member of such group by reason of this sentence) or controls any such member. For purposes of the preceding sentence, control shall be determined under the rules of section 954(d)(3).
(E) Sold
For purposes of this subsection, the terms "sold", "sells", and "sale" shall include any lease, license, exchange, or other disposition.
(c) Regulations
The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section.
(Added
Editorial Notes
Prior Provisions
A prior section 250, added
Statutory Notes and Related Subsidiaries
Effective Date
Section applicable to taxable years beginning after Dec. 31, 2017, see section 14202(c) of