Reg. § 1.965-0 Outline of section 965 regulations.
This section lists the headings for through .
§ 1.965-1 Overview, general rules, and definitions.
(a) Overview.
(1) In general.
(2) Scope.
(b) Section inclusion amounts.
(1) Inclusion of the pro rata share of the section earnings amount.
(2) Reduction by the allocable share of the aggregate foreign E&P deficit.
(c) Section deduction amounts.
(d) Treatment of specified foreign corporation as a controlled foreign corporation.
(e) Special rule for certain controlled domestic partnerships.
(1) In general.
(2) Definition of a controlled domestic partnership.
(f) Definitions.
(1) 8 percent rate amount.
(2) 8 percent rate equivalent percentage.
(3) 15.5 percent rate amount.
(4) 15.5 percent rate equivalent percentage.
(5) Accounts payable.
(6) Accounts receivable.
(7) Accumulated post-1986 deferred foreign income.
(8) Aggregate foreign cash position.
(9) Aggregate foreign E&P deficit.
(10) Aggregate section inclusion amount.
(11) Allocable share.
(12) Bona fide hedging transaction.
(13) Cash-equivalent asset.
(i) In general.
(ii) Specified commodity.
(14) Cash-equivalent asset hedging transaction.
(i) In general.
(ii) Aggregate hedging transactions.
(15) Cash measurement dates.
(16) Cash position.
(i) General rule.
(ii) Fair market value of cash-equivalent assets.
(iii) Measurement of derivative financial instruments.
(iv) Translation of cash position amounts.
(17) Deferred foreign income corporation.
(i) In general.
(ii) Priority rule.
(18) Derivative financial instrument.
(19) Domestic pass-through entity.
(20) Domestic pass-through owner.
(21) Domestic pass-through owner share.
(22) E&P deficit foreign corporation.
(i) In general.
(ii) Determination of deficit in post-1986 earnings and profits.
(23) E&P measurement dates.
(24) Final cash measurement date.
(25) First cash measurement date.
(26) Inclusion year.
(27) Net accounts receivable.
(28) Pass-through entity.
(29) Post-1986 earnings and profits.
(i) General rule.
(ii) Foreign income taxes.
(iii) Deficits in earnings and profits.
(30) Pro rata share.
(31) Second cash measurement date.
(32) Section stock.
(33) Section U.S. shareholder.
(34) Section U.S. shareholder inclusion year.
(35) Section regulations.
(36) Section earnings amount.
(37) Section inclusion.
(38) Section inclusion amount.
(39) Section previously taxed earnings and profits.
(40) Section previously taxed earnings and profits.
(41) Section deduction.
(42) Section deduction amount.
(43) Short-term obligation.
(44) Specified E&P deficit.
(45) Specified foreign corporation.
(i) General rule.
(ii) Special attribution rule.
(A) In general.
(B) Attribution for purposes of the ten percent standard.
(iii) Passive foreign investment companies.
(46) Spot rate.
(47) United States shareholder.
(g) Examples.
(1) Example 1.
(i) Facts.
(ii) Analysis.
(2) Example 2.
(i) Facts.
(ii) Analysis.
(3) Example 3.
(i) Facts.
(ii) Analysis.
(4) Example 4.
(i) Facts.
(ii) Analysis.
(5) Example 5.
(i) Facts.
(ii) Analysis.
(A) Determination of status as a deferred foreign income corporation.
(B) Determination of status as an E&P deficit foreign corporation.
(6) Example 6.
(i) Facts.
(ii) Analysis.
(7) Example 7.
(i) Facts.
(ii) Analysis.
(8) Example 8.
(i) Facts.
(ii) Analysis.
§ 1.965-2 Adjustments to earnings and profits and basis.
(a) Scope.
(b) Determination of and adjustments to earnings and profits of a specified foreign corporation for purposes of applying sections , , , and .
(c) Adjustments to earnings and profits by reason of section .
(d) Adjustments to earnings and profits by reason of section .
(1) Adjustments to earnings and profits described in section and (c)(3) of deferred foreign income corporations.
(2) Adjustments to earnings and profits described in section of E&P deficit foreign corporations.
(i) Increase in earnings and profits by an amount equal to the portion of the section U.S. shareholder's pro rata share of the specified E&P deficit.
(A) In general.
(B) Reduction of a qualified deficit.
(ii) Determination of portion of a section U.S. shareholder's pro rata share of a specified E&P deficit taken into account.
(A) In general.
(B) Designation of portion of a section U.S. shareholder's pro rata share of a specified E&P deficit taken into account.
(e) Adjustments to basis by reason of section .
(1) General rule.
(2) Section election.
(f) Adjustments to basis by reason of section .
(1) In general.
(2) Election to make adjustments to basis to account for the application of section .
(i) In general.
(ii) Basis adjustments.
(A) Increase in basis with respect to a deferred foreign income corporation.
(1) In general.
(2) Limited basis adjustment.
(B) Reduction in basis with respect to an E&P deficit foreign corporation.
(1) In general.
(2) Limited basis adjustment.
(C) Section election.
(iii) Rules regarding the election.
(A) Consistency requirement.
(B) Manner of making election.
(1) Timing.
(i) In general.
(ii) Transition rule.
(2) Election statement.
(g) Gain reduction rule.
(1) Reduction in gain recognized under section by reason of distributions attributable to section previously taxed earnings and profits in the inclusion year.
(i) In general.
(ii) Definition of section previously taxed earnings and profits.
(2) Reduction in basis by an amount equal to the gain reduction amount.
(h) Rules of application for specified basis adjustments.
(1) Timing of basis adjustments.
(2) Netting of basis adjustments.
(3) Gain recognition for reduction in excess of basis.
(4) Adjustments with respect to each share.
(i) Section stock.
(ii) Applicable property.
(5) Stock or property for which adjustments are made.
(i) In general.
(ii) Special rule for an interest in a foreign pass-through entity.
(i) Definitions.
(1) Applicable property.
(2) Foreign pass-through entity.
(3) Property.
(j) Examples.
(1) Example 1.
(i) Facts.
(ii) Analysis.
(A) Adjustments to section classification of earnings and profits for inclusion under section without regard to section .
(B) Distributions between specified foreign corporations before January 1, 2018.
(C) Section inclusion amount.
(1) CFC1 section earnings amount.
(2) CFC2 section earnings amount.
(3) Effect on earnings and profits described in section and (3).
(D) Distribution to United States shareholder.
(E) Section and section consequences.
(1) Distribution by and inclusions with respect to CFC2.
(2) Inclusions with respect to CFC1.
(2) Example 2.
(i) Facts.
(ii) Analysis.
(A) Adjustments to section classification of earnings and profits for inclusion under section without regard to section .
(B) Distributions between specified foreign corporations before January 1, 2018.
(C) Section inclusion amount.
(1) CFC1 section earnings amount.
(2) CFC2 section earnings amount.
(3) Effect on earnings and profits described in section and (3).
(D) Distribution to United States shareholder.
(3) Example 3.
(i) Facts.
(ii) Analysis.
(A) Adjustments to section classification of earnings and profits for inclusion under section without regard to section .
(B) Distributions between specified foreign corporations before January 1, 2018.
(C) Section inclusion amount.
(1) CFC1 section earnings amount.
(2) CFC2 section earnings amount.
(3) Effect on earnings and profits described in section and (3).
(D) Distribution to United States shareholder.
(4) Example 4.
(i) Facts.
(ii) Analysis.
(A) Adjustments to section classification of earnings and profits for inclusion under section without regard to section .
(B) Distributions between specified foreign corporations before January 1, 2018.
(C) Section inclusion amount.
(1) CFC1 section earnings amount.
(2) CFC2 section earnings amount.
(3) Effect on earnings and profits described in section and (3).
(D) Distribution to United States shareholder.
(1) Distribution that is a specified payment.
(2) Distribution to United States shareholder.
(E) Section and section consequences.
(5) Example 5.
(i) Facts.
(ii) Analysis.
(A) Section inclusion amount.
(1) CFC section earnings amount.
(2) Effect on earnings and profits described in section and (3).
(6) Example 6.
(i) Facts.
(ii) Analysis.
(A) Adjustments to section classification of earnings and profits for section inclusion.
(B) Section inclusion amount.
(C) Distributions to United States shareholders.
(7) Example 7.
(i) Facts.
(ii) Analysis.
(8) Example 8.
(i) Facts.
(ii) Analysis.
(A) Application of the gain reduction rule.
(B) Adjustments to the basis of CFC1.
(9) Example 9.
(i) Facts.
(ii) Analysis.
(A) Application of the gain reduction rule.
(B) Adjustments to the basis of CFC1 and CFC2.
§ 1.965-3 Section 965(c) deductions.
(a) Scope.
(b) Rules for disregarding certain assets for determining aggregate foreign cash position.
(1) Disregard of certain obligations between related specified foreign corporations.
(2) Disregard of other assets upon demonstration of double-counting.
(3) Disregard of portion of cash position of noncorporate entities treated as specified foreign corporations.
(4) Examples.
(i) Example 1.
(A) Facts.
(B) Analysis.
(1) Loan from CFC1 to CFC2.
(2) Account receivable of CFC1 held by CFC2.
(3) Loan from CFC1 to CFC3.
(ii) Example 2.
(A) Facts.
(B) Analysis.
(iii) Example 3.
(A) Facts.
(B) Analysis.
(iv) Example 4.
(A) Facts.
(B) Analysis.
(v) Example 5.
(A) Facts.
(B) Analysis.
(1) Treatment of PS1.
(2) Treatment of PS2.
(c) Determination of aggregate foreign cash position for a section U.S. shareholder inclusion year.
(1) Single section U.S. shareholder inclusion year.
(2) Multiple section U.S. shareholder inclusion years.
(i) Allocation to first section U.S. shareholder inclusion year.
(ii) Allocation to succeeding section U.S. shareholder inclusion years.
(3) Estimation of aggregate foreign cash position.
(4) Examples.
(i) Example 1.
(A) Facts.
(B) Analysis.
(ii) Example 2.
(A) Facts.
(B) Analysis.
(d) Increase of income by section deduction of an expatriated entity.
(1) In general.
(2) Definition of expatriated entity.
(3) Definition of surrogate foreign corporation.
(e) Section election.
(1) In general.
(2) Example.
(i) Facts.
(ii) Analysis.
(f) Treatment of section deduction under certain provisions of the Internal Revenue Code.
(1) Section .
(2) Sections , , and .
(i) Adjustments to basis.
(ii) S corporation accumulated adjustments account.
(iii) Example.
(A) Facts.
(B) Analysis.
(3) Section .
(4) Section .
(g) Domestic pass-through entities.
§ 1.965-4 Disregard of certain transactions.
(a) Scope.
(b) Transactions undertaken with a principal purpose of changing the amount of a section element.
(1) General rule.
(2) Presumptions and exceptions for the application of the general rule.
(i) Overview.
(ii) Definitions.
(A) Relatedness.
(B) Transfer.
(1) In general.
(2) Indirect transfer.
(iii) Cash reduction transactions.
(A) General rule.
(B) Per se rules for certain distributions.
(iv) E&P reduction transactions.
(A) General rule.
(1) Definition of pro rata share reduction transaction.
(2) Definition of E&P deficit transaction.
(B) Per se rule for internal group transactions.
(C) Example.
(1) Facts.
(2) Analysis.
(c) Disregard of certain changes in method of accounting and entity classification elections.
(1) Changes in method of accounting.
(2) Entity classification elections.
(d) Definition of a section element.
(e) Rules for applying and of this section.
(1) Determination of whether there is a change in the amount of a section element.
(2) Treatment of domestic pass-through owners as United States shareholders.
(3) Exception for certain incorporation transactions.
(i) In general.
(ii) Aggregate foreign cash position.
(4) Consequences of liquidation.
(i) In general.
(ii) Specified liquidation date.
(f) Disregard of certain transactions occurring between E&P measurement dates.
(1) Disregard of specified payments.
(2) Definition of specified payment.
(3) Non-application of disregard rule.
(4) Examples.
(i) Example 1.
(A) Facts.
(B) Analysis.
(ii) Example 2.
(A) Facts.
(B) Analysis.
(iii) Example 3.
(A) Facts.
(B) Analysis.
(iv) Example 4.
(A) Facts.
(B) Analysis.
(v) Example 5.
(A) Facts.
(B) Analysis.
(vi) Example 6.
(A) Facts.
(B) Analysis.
§ 1.965-5 Allowance of credit or deduction for foreign income taxes.
(a) Scope.
(b) Rules for foreign income taxes paid or accrued.
(c) Rules for foreign income taxes treated as paid or accrued.
(1) Disallowed credit.
(i) In general.
(ii) Foreign income taxes deemed paid under section (as in effect on December 21, 2017).
(iii) [Reserved]
(2) Disallowed deduction.
(3) Coordination with section .
(i) In general.
(ii) Domestic corporation that is a domestic pass-through owner.
(d) Applicable percentage.
(1) In general.
(2) No section inclusion amount.
(3) Applicable percentage for domestic pass-through owners.
(4) Applicable percentage with respect to certain distributions of previously taxed earnings and profits.
§ 1.965-6 Computation of foreign income taxes deemed paid and allocation and apportionment of deductions.
(a) Scope.
(b) Computation of foreign income taxes deemed paid.
(1) In general.
(2) Dividend or inclusion in excess of post-1986 undistributed earnings.
(3) Treatment of adjustment under section .
(4) Section fraction.
(c) Allocation and apportionment of deductions.
(d) Hovering deficits.
§ 1.965-7 Elections, payment, and other special rules.
(a) Scope.
(b) Section election.
(1) In general.
(i) Amount of installments.
(ii) Increased installments due to a deficiency or a timely filed or amended return.
(A) In general.
(B) Timing.
(C) Exception for negligence, intentional disregard, or fraud.
(iii) Due date of installments.
(A) In general.
(B) Extension for specified individuals.
(2) Manner of making election.
(i) Eligibility.
(ii) Timing.
(iii) Election statement.
(3) Acceleration of payment.
(i) Acceleration.
(ii) Acceleration events.
(iii) Eligible section transferee exception.
(A) In general.
(1) Requirement to have a covered acceleration event.
(2) Requirement to enter into a transfer agreement.
(B) Transfer agreement.
(1) Eligibility.
(2) Filing requirements.
(i) In general.
(ii) Transition rule.
(3) Signature requirement.
(4) Terms of agreement.
(5) Consolidated groups.
(6) Leverage ratio.
(C) Consent of Commissioner.
(1) In general.
(2) Material misrepresentations and omissions.
(D) Effect of assumption.
(1) In general.
(2) Eligible section transferor liability.
(E) Qualifying consolidated group member transaction.
(1) Definition of qualifying consolidated group member transaction.
(2) Definition of qualified successor.
(3) Departure of multiple members of a consolidated group.
(c) Section election.
(1) In general.
(2) Manner of making election.
(i) Eligibility.
(ii) Timing.
(iii) Election statement.
(3) Triggering events.
(i) In general.
(ii) Triggering events.
(iii) Partial transfers.
(iv) Eligible section transferee exception.
(A) In general.
(1) Requirement to have a covered triggering event.
(2) Requirement to enter into a transfer agreement.
(B) Transfer agreement.
(1) Eligibility.
(2) Filing requirements.
(i) In general.
(ii) Transition rule.
(iii) Death of eligible section transferor.
(3) Signature requirement.
(4) Terms of agreement.
(5) Special rule in the case of death of eligible section transferor.
(6) Leverage ratio.
(C) Consent of Commissioner.
(1) In general.
(2) Material misrepresentations and omissions.
(D) Effect of assumption.
(1) In general.
(2) Eligible section transferor liability.
(v) Coordination with section election.
(A) In general.
(B) Timing for election.
(C) Due date for installment.
(D) Limitation.
(1) In general.
(2) Manner of obtaining consent.
(i) In general.
(ii) Transition rule.
(3) Signature requirement.
(4) Terms of agreement.
(5) Consent of Commissioner.
(i) In general.
(ii) Material misrepresentations and omissions.
(6) Leverage ratio.
(4) Joint and several liability.
(5) Extension of limitation on collection.
(6) Annual reporting requirement.
(i) In general.
(ii) Failure to report.
(d) Section election and special rule for real estate investment trusts.
(1) In general.
(2) Inclusion schedule for section election.
(3) Manner of making election.
(i) Eligibility.
(ii) Timing.
(iii) Election statement.
(4) Coordination with section .
(5) Acceleration of inclusion.
(6) Treatment of section inclusions of a real estate investment trust.
(e) Section election.
(1) In general.
(i) General rule.
(ii) Applicable amount for section election.
(iii) Scope of section election.
(iv) [Reserved]
(2) Manner of making election.
(i) Eligibility.
(ii) Timing.
(iii) Election statement.
(f) Election to use alternative method for calculating post-1986 earnings and profits.
(1) Effect of election for specified foreign corporations that do not have a 52-53-week taxable year.
(2) Effect of election for specified foreign corporations that have a 52-53-week taxable year.
(3) Computation of post-1986 earnings and profits using alternative method.
(4) Definitions.
(i) 52-53-week taxable year.
(ii) Annualized earnings and profits amount.
(iii) Daily earnings amount.
(iv) Notional measurement date.
(5) Manner of making election.
(i) Eligibility.
(ii) Timing.
(iii) Election statement.
(6) Examples.
(i) Example 1.
(A) Facts.
(B) Analysis.
(ii) Example 2.
(A) Facts.
(B) Analysis.
(g) Definitions.
(1) Deferred net tax liability.
(2) REIT section amounts.
(3) Section election.
(4) Section net tax liability.
(5) Section election.
(6) Section net tax liability.
(7) Section election.
(8) Section election.
(9) Specified individual.
(10) Total net tax liability under section .
(i) General rule.
(ii) Net income tax.
(iii) Foreign tax credits.
§ 1.965-8 Affiliated groups (including consolidated groups).
(a) Scope.
(b) Reduction of E&P net surplus shareholder's pro rata share of the section earnings amount of a deferred foreign income corporation by the allocable share of the applicable share of the aggregate unused E&P deficit.
(1) In general.
(2) Consolidated group as part of an affiliated group.
(c) Designation of portion of excess aggregate foreign E&P deficit taken into account.
(1) In general.
(2) Consolidated group as part of an affiliated group.
(d) [Reserved]
(1) [Reserved]
(2) Consolidated groups.
(e) Treatment of a consolidated group as a single section U.S. shareholder or a single person.
(1) In general.
(2) Limitation.
(3) Determination of section deduction amount.
(f) Definitions.
(1) Aggregate unused E&P deficit.
(i) In general.
(ii) Reduction with respect to E&P net deficit shareholders that are not wholly owned by the affiliated group.
(2) Allocable share.
(3) Applicable share.
(4) Consolidated group aggregate foreign cash position.
(5) E&P net deficit shareholder.
(6) E&P net surplus shareholder.
(7) Excess aggregate foreign E&P deficit.
(8) Group cash ratio.
(9) Group ownership percentage.
(g) Examples.
(1) Example 1.
(i) Facts.
(A) In general.
(B) Facts relating to section .
(ii) Analysis.
(A) Section inclusion amounts before application of section .
(B) Application of section .
(1) Determination of E&P net surplus shareholders and E&P net deficit shareholders.
(2) Determining section inclusion amounts under section .
(C) Aggregate foreign cash position.
(D) Section deduction amount.
(2) Example 2.
(i) Facts.
(ii) Analysis.
(A) Section inclusion amount.
(1) Single section U.S. shareholder treatment.
(2) Determination of inclusion amount.
(B) Consolidated group aggregate foreign cash position.
(C) Section deduction amount.
§ 1.965-9 Applicability dates.
(a) In general.
(b) Applicability dates for rules disregarding certain transactions.
[T.D. 9846, 84 FR 1875, Feb. 5, 2019, as amended by T.D. 9846, 84 FR 14260, Apr. 10, 2019]