US LAWS, STATUTES & CODES ON-LINE

   B Corporation (second-tier corporation):  Pretax earnings and profits.......................   $250.00  Foreign income taxes (20%)........................     50.00  Earnings and profits..............................    200.00  Amounts required to be included in N Corporation's    150.00   gross income under section 951 with respect to B   Corporation......................................  Dividends paid to A Corporation...................    150.00  Foreign income taxes paid on or with respect to        50.00   earnings and profits of B Corporation............A Corporation (first-tier corporation):  Pretax earnings and profits:    Dividends from B Corporation....................   $150.00    Other income....................................    200.00                                                     ----------     Total pretax earnings and profits........................    350.00  Foreign income taxes (10%)........................     35.00  Earnings and profits..............................    315.00  Dividends paid to N Corporation...................    135.00  Foreign income taxes paid by A Corporation on or       35.00   with respect to its accumulated profits..........N Corporation (domestic corporation):  Foreign income taxes of B Corporation deemed paid      37.50   by N Corporation for 1978 under section 960(a)(1)   ($150/$200x$50)..................................  Foreign income taxes of A Corporation deemed paid      15.00   by N Corporation for 1978 under section 902(a)   ($135/$315x$35)..................................                                                     -----------     Total foreign income taxes deemed paid by N         52.50     Corporation under section 901.................. 

   B Corporation (second-tier corporation):  Pretax earnings and profits.......................   $100.00  Foreign income taxes (40%)........................     40.00  Earnings and profits..............................     60.00  Dividends paid to A Corporation...................     50.00  Foreign income taxes paid by B Corporation on or       40.00   with respect to its accumulated profits..........  Foreign income taxes of B Corporation deemed paid      33.33   by A Corporation for 1978 under section 902(b)(1)   ($50/$60x$40)....................................A Corporation (first-tier corporation):  Pretax earnings and profits:    Dividends from B Corporation....................    $50.00    Other income....................................    200.00                                                     ----------    Total pretax earnings and profits.........................    250.00  Foreign income taxes (10%)........................     25.00  Earnings and profits..............................    225.00  Foreign income taxes paid, and deemed to be paid,      58.33   by A Corporation on or with respect to its   earnings and profits ($25.00+$33.33).............  Amounts required to be included in N Corporation's    180.00   gross income for 1978 under section 951 with   respect to A Corporation.........................  Dividends paid to N Corporation:    Dividends to which section 902(a) does not apply    180.00     (from A Corporation's earnings and profits in     respect of which an amount is required under     section 951 to be included in N Corporation's     gross income with respect to A Corporation)....    Dividends to which section 902(a) applies (from      20.00     A Corporation's other earnings and profits)....                                                     ----------    Total dividends paid to N Corporation.....................   $200.00N Corporation (domestic corporation):  Foreign income taxes of corporations A and B           46.66   deemed paid by N Corporation under section   960(a)(1) ($180/$225x$58.33).....................  Foreign income taxes of corporations A and B            5.18   deemed paid by N Corporation under section 902(a)   ($20/$225x$58.33)................................                                                     -----------     Total foreign income taxes deemed paid by N         51.84     Corporation under section 901.................. 

   B Corporation (second-tier corporation):  Pretax earnings and profits.......................   $250.00  Foreign income taxes (20%)........................     50.00  Earnings and profits..............................    200.00  Amounts required to be included in N Corporation's    150.00   gross income under section 951 for 1978 with   respect to B Corporation.........................  Dividends paid by B Corporation:    Dividends to which section 902(b) does not apply   $150.00     (from B Corporation's earnings and profits in     respect of which an amount is required under     section 951 to be included in N Corporation's     gross income with respect to B Corporation)....    Dividends to which section 902(b)(1) applies         25.00     (from B Corporation's other earnings and     profits).......................................                                                     ----------     Total dividends paid to A Corporation....................    175.00  Foreign income taxes paid by B Corporation on or       50.50   with respect to its accumulated profits..........  Foreign income taxes of B Corporation deemed paid       6.25   by A Corporation for 1978 under section 902(b)(1)   ($25/$200x$50)...................................A Corporation (first-tier corporation):  Pretax earnings and profits.......................    175.00  Foreign income tax (10 percent)...................     17.50  Earnings and profits..............................    157.50  Earnings and profits after exclusion of amounts        22.50   attributable to dividends to which section 902(b)   does not apply ($157.50 less [$150- ($150x0.10)])  Amount required to be included in N Corporation's      22.50   gross income for 1978 under section 951 with   respect to A Corporation.........................  Dividends paid to N Corporation...................         0N Corporation (domestic corporation):  Foreign income taxes deemed paid by N Corporation   under section 960(a)(1)(C) with respect to A   Corporation:    Tax actually paid by A Corporation ($22.50/           2.50     $157.50x$17.50)................................    Tax of B Corporation deemed paid by A                 6.25     Corporation under section 902(b)(1) ($22.50/     $22.50x$6.25)..................................                                                     -----------                                                      ........      8.75  Foreign income taxes deemed paid by N Corporation under          37.50   section 960(a)(1)(C) with respect to B Corporation ($150/   $200x$50)..................................................                                                     -----------      Total taxes deemed paid under section              46.20       960(a)(1)(C)................................. 

   B Corporation (second-tier corporation):  Pretax earnings and profits.......................   $250.00  Foreign income taxes (20%)........................     50.00  Earnings and profits..............................    200.00  Amounts required to be included in N Corporation's    150.00   gross income for 1978 under section 951 with   respect to B Corporation.........................  Dividends paid by B Corporation:    Dividends to which section 902(b) does not apply   $150.00     (from B Corporation's earnings and profits in     respect of which an amount is required under     section 951 to be included in N Corporation's     gross income with respect to B Corporation)....    Dividends to which section 902(b) applies (from     $25.00     B Corporation's other earnings and profits)....                                                     ----------     Total dividends paid to A Corporation....................   $175.00  Foreign income taxes paid by B Corporation on or       50.00   with respect to its accumulated profits..........  Foreign income taxes of B Corporation deemed paid       6.25   by A Corporation for 1978 under section 902(b)(1)   ($25/$200x$50)...................................A Corporation (first-tier corporation):  Pretax earnings and profits:    Dividends received from B Corporation...........    175.00    Other income....................................    100.00                                                     ----------     Total pretax earnings and profits........................    275.00  Foreign income taxes (10 percent).................     27.50  Earnings and profits..............................    247.50  Earnings and profits after exclusion of amounts       112.50   attributable to dividends to which section 902(b)   does not apply ($247.50 less [$150 -($150x0.10)])  Amount required to be included in N Corporation's      22.50   gross income for 1978 under section 951 with   respect to A Corporation.........................Distributions paid by A Corporation:  Dividends to which section 902(a) does not apply       22.50   (From A Corporation's earnings and profits in   respect of which an amount is required under   section 951 to be included in N Corporation's   gross income with respect to A Corporation)......  Dividends to which section 902(a) applies (from A     202.50   Corporation's other earnings and profits)........                                                     ----------    Total dividends paid to N Corporation...........    225.00N Corporation (domestic corporation):  Foreign income taxes deemed paid by N Corporation   under section 960(a)(1) with respect to_    B Corporation ($150/$200x$50)...................  ........     37.50    A Corporation:      Tax paid by A Corporation ($22.50/                  2.50       $247.50x$27.50)..............................      Tax of B Corporation deemed paid by A               1.25      3.75       Corporation under section 902(b)(1) ($22.50/       $112.50x$6.25)...............................                                                     -----------        Total taxes deemed paid under section 960(a)(1).......     41.25  Foreign income taxes deemed paid by N Corporation   under section 902(a)(1) with respect to A   Corporation:    Tax paid by A Corporation ($200.50/                  22.50     $247.50x$27.50)................................    Tax of B Corporation deemed paid by A                 3.75     Corporation ($67.50/ $112.50x$6.25)............                                                     ----------      Total taxes deemed paid under section 902(a)(1).........     26.52                                                     -----------    Total foreign income taxes deemed paid by N          67.05     Corporation under section 901.................. 

   B Corporation (2d-tier corporation):  Pretax earnings and profits.......................   $200.00  Foreign income taxes (20%)........................     40.00  Earnings and profits..............................    160.00  Amount required to be included in N Corporation's     100.00   gross income for 1978 under section 951 with   respect to B Corporation.........................Dividends paid by B Corporation:  Dividends to which section 902(b) does not apply     $100.00   (from B corporation's earnings and profits in   respect of which an amount is required under   section 951 to be included in N corporation's   gross income with respect to B corporation)......  Dividends to which section 902(b)(1) applies (from     50.00   B corporation's other earnings and profits)......                                                     ----------   Total dividends paid to A corporation......................    150.00  Foreign income taxes of B corporation deemed paid      12.50   by A corporation for 1978 under section 902(b)(1)   ($50/$100x $40)..................................A corporation (1st-tier corporation):  Pretax earnings and profits:    Dividends received from B corporation...........    150.00    Other income....................................    100.00                                                     ----------      Total pretax earnings and profits.............  ........    250.00  Foreign income taxes:    On dividends received from B corporation........      None    On other income ($100x0.10).....................     10.00     Total foreign income taxes.....................  ........     10.00Earnings and profits:  Attributable to dividends received from B             100.00   corporation to which section 902(b) does not   apply............................................Attributable to other income:  Attributable to dividends received from B              50.00   Corporation to which section 902(b)(1) applies...  Attributable to other income ($100-$10)...........     90.00                                                     ----------   Subtotal...................................................    140.00   Total earnings and profits.......................    240.00  Earnings and profits after exclusion of amounts       140.00   attributable to dividends to which section 902(b)   does not apply ($240-$100).......................  Amount required to be included in N corporation's       None   gross income for 1978 under section 951 with   respect to A corporation.........................  Dividends paid by A corporation:    Dividends to which section 902(a) does not apply      None     (from A corporation's earnings and profits in     respect of which an amount is required under     section 951 to be included in N corporation's     gross income with respect to A corporation)....    Dividends to which section 902(a) applies (from    $175.00     A corporation's other earnings and profits)....                                                     ----------     Total dividends paid to N corporation....................   $175.00N corporation (domestic corporation):  Foreign income taxes deemed paid by N corporation      25.00   under section 960(a)(1) with respect to B   corporation ($100/$160x$40)......................  Foreign income taxes deemed paid by N corporation   under section 902(a) with respect to A   corporation (allocation of earnings and profits   being made under pars. (c)(2) and (d) of this   section):    Tax paid by A corporation in respect to               None     dividends received from B Corporation to which     section 902(b) does not apply ($100/ $100x$0)..    Tax paid by A corporation in respect to its           5.36     other income ($75/ $140x$10)...................    Tax paid by B corporation deemed paid by A            6.70     corporation in respect to such other income     ($75/$140x$12.50)..............................                                                     ----------      Total taxes deemed paid under section 902(a)............     12.06    Total foreign income taxes deemed paid by N          37.06  ........     corporation under section 901.................. 

   B Corporation (2d-tier corporation):  Pretax earnings and profits.......................   $250.00  Foreign income taxes (20 percent).................    150.00  Earnings and profits..............................    200.00  Amount required to be included in N Corporation's     150.00   gross income for 1978 under section 951 with   respect to B corporation.........................Dividends paid by B corporation:    Dividends to which section 902(b) does not apply   $150.00     (from B corporation's earnings and profits in     respect of which an amount is required under     section 951 to be included in N corporation's     gross income with respect to B corporation)....    Dividends to which section 902(b)(1) applies         50.00     (from B corporation's other earnings and     profits).......................................                                                     ----------   Total dividends paid to A corporation......................    200.00  Foreign income taxes of B corporation deemed paid      12.50   by A corporation for 1978 under section 902(b)(1)   ($50/$200x$50)...................................A corporation (1st-tier corporation):  Pretax earnings and profits:    Dividends received from B corporation...........    200.00    Other income....................................    100.00                                                     ----------     Total pretax earnings and profits........................    300.00  Foreign income taxes:    On dividends received from B corporation to           7.50     which section 902(b) does not apply ($150x     0.05)..........................................    On other income:      Dividends received from B corporation to which      2.50       section 902(b)(1) applies ($50x 0.05)........      Other income of A corporation ($100x0.20).....     20.00                                                     ----------     Total....................................................     22.50                                                     -----------    Total foreign income taxes......................     30.00Earnings and profits:  Attributable to dividends received from B             142.50   corporation to which section 902(b) does not   apply ($150-$7.50)...............................  Attributable to other income:    Attributable to dividends received from B            47.50     corporation to which section 902(b)(1) applies     ($50-$2.50)....................................    Attributable to other income ($100-$20..........     80.00                                                     ----------     Total....................................................    127.50                                                     -----------     Total earnings and profits.....................    270.00Earnings and profits after exclusion of amounts         127.50 attributable to dividends to which section 902(b) does not apply ($270 less $142.50).................Amount required to be included in N corporation's        47.50 gross income for 1978 under section 951 with respect to A corporation...........................Dividends paid by A Corporation:  Dividends to which section 902(a) does not apply        None   (from A corporation's earnings and profits in   respect of which an amount is required under   section 951 to be included in N corporation's   gross income with respect to A corporation)......  Dividends to which section 902(a)(1) applies (from   $100.00   A corporation's other earnings and profits)......                                                     ----------     Total dividends paid to N corporation....................   $100.00N Corporation (domestic corporation):  Foreign income taxes deemed paid by N corporation      37.50   under section 960(a)(1) with respect to_B   corporation ($150/$200x$50)  A corporation (allocation of earnings and profits   being made under § 1.960-1(c)(3) and par.   (d) of this section):    Tax paid by A corporation ($47.50/                    8.38     $127.50x$22.50)................................    Tax of B corporation deemed paid by A                 4.66     corporation under section 902(b)(1) ($47.50/     $127.50x$12.50)................................                                                     ----------     Total..........................................  ........     13.04                                                               =========     Total taxes deemed paid under section 960(a)(1)  ........     50.54  Foreign income taxes deemed paid by N corporation       5.26   under section 902(a) with respect to A   corporation (allocations of earnings and profits   being made under pars. (c)(2) and (d) of this   section) ($100/$142.50x$7.50)....................                                                     ----------    Total foreign income taxes deemed paid by N Corporation        55.80     under section 901........................................ 

   Pretax earnings and profits...................................   $150.00Foreign taxes paid by C Corporation (30%)...........     45.00Earnings and profits................................    105.00Amount required to be included in gross income of N      50.00 Corporation under section 951 with respect to C Corporation........................................Dividend to B Corporation...........................     75.00  Dividend from earnings and profits to which            50.00   section 902(b)(2) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to C Corporation).  Dividend from earnings and profits to which           $25.00   section 902(b)(2) applies (attributable to   amounts not included in N Corporation's gross   income with respect to C Corporation)............Amount of foreign income taxes of C Corporation deemed paid by B Corporation under section 902(b)(2) and § 1.960-2(b): 

$$

     ($25/$105x$45)..............................................    $10.71 

   Pretax earnings and profits:  Dividend from C Corporation.......................    $75.00  Other earnings and profits........................    225.00                                                     -----------    Total pretax earnings and profits.........................   $300.00Foreign income taxes paid by B Corporation (40%)....    120.00Earnings and profits................................    180.00  Earnings and profits attributable to amounts to        30.00   which section 902(b)(2) does not apply (amounts   included in N Corporation's gross income under   section 951 with respect to C Corporation ($50-   ($50x.40)).......................................  Other earnings and profits........................    150.00Earnings and profits of B Corporation after exclusion for         150.00 amounts to which section 902(b)(2) does not apply (amounts attributable to earnings and profits which are included in N Corporation's gross income under section 951 with respect to C Corporation) ($180-$30)....................................Amount to be included in gross income under section      15.00 951 of N Corporation with respect to B Corporation.Amount of dividend to A Corporation.................     60.00  Dividend from earnings and profits to which            30.00   section 902(b)(2) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to C Corporation).  Dividend from earnings and profits to which            15.00   section 902(b)(1) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to B Corporation).  Dividend from other earnings and profits               15.00   (attributable to amounts not included in N   Corporation's gross income under section 951 with   respect to B or C Corporation)...................Foreign income taxes of B Corporation deemed paid by A Corporation under section 902(b)(1) and § 1.960-2(b): 

$$

     ($45/$180x120)..............................................    $30.00Foreign income taxes (of C Corporation) deemed paid by B Corporation deemed paid by A Corporation under section 902(b)(1) in accordance with § 1.960-2(b) and § 1.960-2(d)(2)(i) and (ii): 

$$

     ($15/$150x$10.71)...........................................      1.07 

   Pretax earnings and profits:  Dividend from B Corporation.......................    $60.00  Other earnings and profits........................         0                                                     -----------    Total pretax earnings and profits.........................    $60.00Foreign income taxes paid by A Corporation (10%)....      6.00Earnings and profits................................     54.00  Earnings and profits attributable to amounts to        27.00   which section 902(b)(2) does not apply   (attributable to amounts previously included in N   Corporation's gross income under section 951 with   respect to C Corporation) ($30-($30X.10))........  Earnings and profits attributable to amounts to        13.50   which section 902(b)(1) does not apply   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to B Corporation) ($15- ($15X.10)).......  Other earnings and profits ($15_($15X.10))........     13.50Earnings and profits of A Corporation after exclusion for          40.50 amounts to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) ($54.00-$13.50)..............................................Earnings and profits of A Corporation after              13.50 exclusion for amounts to which sections 902(b)(1) and (2) do not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B or C Corporation) ($40.50-$27.00)....................................Dividend to N Corporation...........................     45.00  Dividend from earnings and profits to which           $27.00   section 902(b)(2) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to C Corporation).  Dividend from earnings and profits to which            13.50   section 902(b)(1) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to B Corporation).  Dividend from earnings and profits to which                0   section 902(a) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to A Corporation).  Dividend from other earnings and profits                4.50   (attributable to amounts not included in N   Corporation's gross income under section 951 with   respect to A, B, or C Corporation)............... 

   Foreign income taxes deemed paid by N Corporation under section 960(a)(1) and § 1.960-1(c)(1)(ii) with respect to C Corporation: 

$$

     ($50/$105x$45.00)...........................................    $21.43Foreign income taxes deemed paid by N Corporation under            11.07 section 960(a)(1) and § 1.960-1(c)(1)(i) with respect to B Corporation................................................ 

Taxes paid by B Corporation:$$

     ($15/$180x$120)...................................    $10.00 

Taxes deemed paid by B Corporation in accordance with §1.960–2(d)(2)(i):$$

     ($15/$150x$10.71).................................     $1.07                                                     -----------    Total taxes deemed paid by N Corporation under section        $32.50     960(a)(1)................................................Foreign income taxes deemed paid by N Corporation under section 902(a): 

Taxes paid by A Corporation in accordance with §1.960–2(c):$$

     ($45/$54x$6)......................................     $5.00  Taxes paid by B Corporation deemed paid by A   Corporation in accordance with §§ 1.960-   2(c) and 1.960-2(d)(1)(i) and (ii): 

$$

     ($31.50/$40.50x$30.00)............................     23.33 

Taxes (of C Corporation) deemed paid by B Corporation deemed paid by A Corporation in accordance with §§1.960–2(c) and 1.960–2(d)(1)(i) and (ii):$$

     ($4.50/$13.50x$1.07)..............................       .36                                                     -----------    Total taxes deemed paid by N Corporation under section        $28.69     902(a)...................................................                                                               ---------    Total foreign income taxes deemed paid by N         $61.19     Corporation under section 901..................                                                     =========== 

   Pretax earnings and profits...................................   $150.00Foreign income taxes paid by C Corporation (30%)....     45.00Earnings and profits................................    105.00Amount required to be included in gross income of N      50.00 Corporation under section 951 with respect to C Corporation........................................Dividend to B Corporation...........................     75.00  Dividend to which section 902(b)(2) does not apply    $50.00   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to C Corporation)........................  Dividend to which section 902(b)(2) applies            25.00   (attributable to amounts not included in N   Corporation's gross income under section 951 with   respect to C Corporation)........................Amount of foreign income taxes of C Corporation deemed paid by     10.71 B Corporation under section 902(b)(2) and § 1.960-2(b) ($25/$105x$45)...............................................  (For formula see § 1.960-2(g)(1)(i)(A)) 

   Pretax earnings and profits:  Dividend from C Corporation.......................    $75.00  Other earnings and profits........................    225.00                                                     -----------    Total pretax earnings and profits.........................   $300.00Foreign income taxes paid by B Corporation..........     97.50  On dividends received from C Corporation to which      $5.00   section 902(b)(2) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to C Corporation)   ($50x.10)........................................  On dividend from C Corporation to which section         2.50   902(b)(2) applies (attributable to amounts not   included in N Corporation's gross income under   section 951 with respect to C Corporation)   ($25x.10)........................................  On other income of B Corporation ($225x.40).......     90.00Earnings and profits..........................................    202.50  Attributable to dividend to which section              45.00   902(b)(2) does not apply (attributable to amounts   included in N Corporation's gross income under   section 951 with respect to C Corporation) ($50-   $5)..............................................  Attributable to dividend from C Corporation to        $22.50   which section 902(b)(2) applies (attributable to   amounts not included in N Corporation's gross   income under section 951 with respect to C   Corporation) ($25-$2.50).........................  Attributable to other income of B Corporation         135.00   ($225-$90).......................................Earnings and profits after exclusion of amounts attributable     $157.50 to dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($202.50-$45)................................................Amount required to be included in N Corporation's       100.00 gross income under section 951 with respect to B Corporation........................................Dividend paid by B Corporation......................    175.00  Dividend to which section 902(b)(2) does not apply    $45.00   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to C Corporation)........................  Dividend to which section 902(b)(1) does not apply    100.00   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to B Corporation)........................  Dividend from other earnings and profits               30.00   (attributable to amounts not included in N   Corporation's gross income with respect to B or C   Corporation).....................................Foreign income taxes of B Corporation deemed paid by A Corporation under section 902(b)(1) (separate tax rate applicable to dividend received by B Corporation allocation in accordance with § 1.960-2(e)) (for formula see § 1.960-2(g)(1)(ii)(A)(2) (i) and (ii)): 

Tax paid by B Corporation on earnings previously taxed with respect to C Corporation or lower-tiers which is deemed paid by A Corporation:$$

     ($45/$45x$5)................................................     $5.00 

Tax paid by B Corporation on earnings not previously taxed with respect to C Corporation or lower-tiers which is deemed paid by A Corporation:$$

     ($30/157.50x$92.50).........................................    $17.62Foreign income taxes (of C Corporation) deemed paid by B            2.04 Corporation deemed paid by A Corporation under section 902(b)(1) ($30/$157.50x$10.71)...............................  (For formula see § 1.960-2(g)(1)(ii)(B)(1)) 

   Pretax earnings and profits:  Dividend from B Corporation.......................   $175.00  Other income......................................         0                                                     -----------    Total pretax earnings and profits.........................   $175.00Foreign income taxes paid by A Corporation (20%)....     35.00Earnings and profits................................    140.00  Attributable to dividend to which section             $36.00   902(b)(2) does not apply (attributable to amounts   included in N Corporation's gross income under   section 951 with respect to C Corporation) ($45-   ($45x.20)).......................................  Attributable to amounts to which section 902(b)(1)     80.00   does not apply (Attributable to amounts included   in N Corporation's gross income under section 951   with respect to B Corporation) ($100-($100x.20)).  Attributable to other earnings and profits             24.00   (attributable to amounts not included in N   Corporation's gross income with respect to B or C   Corporation).....................................Earnings and profits after exclusion for amounts to which         $60.00 section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation) ($140-$80)....................Earnings and profits after exclusion for amounts to      24.00 which sections 902(b)(1) and 902(b)(2) do not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B or C Corporation) ($60-$36)...........Amount required to be included in N Corporation's         None gross income under section 1951 with respect to A Corporation........................................Dividend to N Corporation...........................   $130.00  Dividend to which section 902(b)(2) does not apply    $36.00   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to C Corporation)........................  Dividend to which section 902(b)(1) does not apply     80.00   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to B Corporation)........................  Dividend to which section 902(a) does not apply            0   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to A Corporation)........................  Dividend from other earnings and profits               14.00   (attributable to amounts not included in N   Corporation's gross income with respect to A, B,   or C Corporation)................................ 

   Foreign income taxes deemed paid by N Corporation under           $21.43 section 960(a)(1) and § 1.960-1(c) with respect to C Corporation ($50/$105x$45)...................................  (for formula see § 1.960-2(g)(2)(i)(A))Foreign income taxes deemed paid by N Corporation        65.53 under section 960(a)(1) with respect to B Corporation (allocation of earnings and profits being made in accordance with § 1.960-1(c)(3) and § 1.960-2(e)) (Separate tax rate applicable to dividend received by B Corporation).. 

Taxes paid by B corporation (for formula see §1.960–2(g)(2)(ii) (A)(2)):$$

     ($100/$157.50x$92.50).............................    $58.73  Taxes (of C Corporation) deemed paid by B               6.80   Corporation under section 902(b)(2) which are   deemed paid by N Corporation under section   960(a)(1) ($100/$157.50x$10.71)..................  (for formula see § 1.960-2(g)(2)(ii)(B)(1))                                                     -----------    Total taxes deemed paid by N Corporation under section        $86.96     960(a)(1)................................................Foreign income taxes deemed paid by N Corporation under section 902(a):  Taxes paid by A Corporation ($130/$140x$35).......    $32.50  (for formula see § 1.960-2(g)(1)(iii)(A)(1))  Taxes paid by B Corporation deemed paid by A Corporation   (Separate tax rate applicable to dividend received by B   Corporation allocation required by § 1.960-2(e)) (for   formula see § 1.960-2(g)(1)(iii)(B)(2) (i) and (ii)):  Tax paid by B Corporation on earnings previously   taxed with respect to C Corporation or lower   tiers which is deemed paid by N Corporation: 

$$

     ($36/$36x$5)......................................     $5.00  Tax paid by B Corporation on earnings not   previously taxed with respect to C Corporation or   lower tiers which is deemed paid by N   Corporation: 

$$

     ($14/$24x$17.62)..................................    $10.28  Taxes (of C Corporation) deemed paid by B               1.19   Corporation deemed paid by A Corporation ($14/   $24x$2.04).......................................                                                     -----------  (for formula see § 1.960-2(g)(1)(iii)(C)(1))    Total taxes deemed paid by N Corporation under section        $48.97     902(a)...................................................                                                     -----------    Total foreign income taxes deemed paid by N         135.93     Corporation under section 901..................                                                     =========== 

   Pretax earnings and profits...................................   $150.00Foreign income taxes paid by C Corporation (30%)....     45.00Earnings and profits................................    105.00Amount required to be included in gross income of N     $50.00 Corporation under section 951 with respect to C Corporation........................................Dividend to B Corporation...........................     75.00  Dividend to which section 902(b)(2) does not apply     50.00   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to C Corporation)........................  Dividend to which section 902(b)(2) applies            25.00   (attributable to amounts not included in N   Corporation's gross income under section 951 with   respect to C Corporation)........................Amount of foreign income taxes of C Corporation deemed paid by     10.71 B Corporation under section 902(b)(2) and § 1.960-2(b) ($25/$105x$45)...............................................  (for formula see § 1.960-2(g)(1)(i)(A)) 

   Pretax earnings and profits:  Dividend from C Corporation.......................    $75.00  Other earnings and profits........................    225.00                                                     -----------    Total pretax earnings and profits.........................   $300.00Foreign income taxes of B Corporation...............    $97.50  On dividends received from C Corporation to which      $5.00   section 902(b)(2) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to C Corporation)   ($50x.10)........................................  On dividend from C Corporation to which section         2.50   902(b)(2) applies (attributable to amounts not   included in N Corporation's gross income under   section 951 with respect to C Corporation)   ($25x.10)........................................  On other income of B Corporation ($225x.40).......     90.00Earnings and profits..........................................   $202.50  Attributable to dividend to which section             $45.00   902(b)(2) does not apply (attributable to amounts   included in N Corporation's gross income under   section 951 with respect to C Corporation) ($50-   $5)..............................................  Attributable to dividend from C Corporation to         22.50   which section 902(b)(2) applies (attributable to   amounts not included in N Corporation's gross   income under section 951 with respect to C   Corporation) ($25-$2.50).........................  Attributable to other income of B Corporation         135.00   ($225-$90).......................................Earnings and profits after exclusion of amounts attributable      157.50 to dividend to which section 902(b)(2) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to C Corporation) ($202.50-$45)................................................Amount required to be included in N Corporation's       100.00 gross income under section 951 with respect to B Corporation........................................Dividend paid by B Corporation......................    175.00  Dividend to which section 902(b)(2) does not apply    $45.00   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to C Corporation)........................  Dividend to which section 902(b)(1) does not apply    100.00   (attributable to amounts included in N   Corporation's gross income under section 951 with   respect to B Corporation)........................  Dividend from other earnings and profits               30.00   (attributable to amounts not included in N   Corporation's gross income with respect to B or C   Corporation).....................................Foreign income taxes of B Corporation deemed paid by A Corporation under section 902(b)(1) with allocation required by § 1.960-2 (e):  ($45/$45x$5)......................................      5.00  ($30/$157.50x$92.50)..............................     17.62  (for formula see § 1.960-2(g)(1)(ii)(A)(2)   (i) and (ii))Foreign income taxes (of C Corporation) deemed paid       2.04 by B Corporation deemed paid by A Corporation under section 902(b)(1): ($30/$157.50 x $10.71)  (for formula see § 1.960-2(g)(1)(ii)(B)(1)) 

   Pretax earnings and profits:  Dividend from B Corporation.......................   $175.00  Other earnings and profits........................    200.00                                                     -----------    Total pretax earnings and profits.........................   $375.00Foreign income taxes paid by A Corporation..........    135.00  On dividend received from B Corporation to which        9.00   section 902(b)(2) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to C Corporation)   ($45x.20)........................................  On dividend received from B Corporation to which       20.00   section 902(b)(1) does not apply (attributable to   amounts included in N Corporation's gross income   under section 951 with respect to B Corporation)   ($100x.20).......................................  On dividend from B Corporation attributable to B        6.00   Corporation's other earnings and profits   (attributable to amounts not included in N   Corporation's gross income with respect to B or C   Corporation) ($30x.20)...........................  On other income of A Corporation ($200x.50).......    100.00Earnings and profits..........................................    240.00  Attributable to dividend to which section              36.00   902(b)(2) does not apply (attributable to amounts   included in N Corporation's gross income under   section 951 with respect to C Corporation) ($45-   $9)..............................................  Attributable to dividend to which section              80.00   902(b)(1) does not apply (attributable to amounts   included in N Corporation's gross income with   respect to B Corporation) ($100-$20).............  Attributable to other earnings and profits of A       124.00   Corporation (attributable to amounts not included   in N Corporation's gross income with respect to   A, B, or C Corporation) [($30-$6)+($200-$100)]...Amount required to be included in N Corporation's gross income      None under section 951 with respect to A Corporation..............Earnings and profits after exclusion of amounts         160.00 attributable to dividend to which section 902(b)(1) does not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B Corporation)..........................Earnings and profits after exclusion of amounts         124.00 attributable to dividend to which sections 902(b)(1) and 902(b)(2) do not apply (attributable to amounts included in N Corporation's gross income under section 951 with respect to B and C Corporation).......................................Dividend to N Corporation...........................    200.00  Dividend attributable to amounts to which section     $36.00   902(b)(2) does not apply (attributable to amounts   included in N Corporation's gross income under   section 951 with respect to C Corporation).......  Dividend attributable to amounts to which section      80.00   902(b)(1) does not apply (attributable to amounts   included in N Corporation's gross income with   respect to B Corporation)........................  Dividend attributable to amounts to which section          0   902(a) does not apply (attributable to amounts   included in N Corporation's gross income under   section 951 with respect to A Corporation).......  Dividend attributable to A Corporation's other        $84.00   earnings and profits (attributable to amounts not   included in N Corporation's gross income under   section 951 with respect to A, B, or C   Corporation)..................................... 

   Foreign income taxes deemed paid by N Corporation under           $21.43 section 960(a)(1) and § 1.960-1(c) with respect to C Corporation ($50/$150x$45)...................................  (for formula see § 1.960-2(g)(2)(i)(A))Foreign income taxes deemed paid by N Corporation        65.53 under section 960(a)(1) with respect to B Corporation (allocation of earning and profits being made in accordance with § 1.960-1(c)(3) and § 1.960-2(e)).............................  Taxes paid by B Corporation ($100/$157.50x$92.50).    $58.73  (for formula see § 1.960-2(g)(2)(ii)(A)(2))  Taxes deemed paid by B Corporation                      6.80   ($100x$157.50x$10.71)............................  (for formula see § 1.960-2(g)(2)(ii)(B)(1))                                                     ----------    Total taxes deemed paid by N Corporation under section         86.96     960(a)(1)................................................Foreign income taxes deemed paid by N Corporation under section 902(a) (separate tax rate applicable to dividends received by A Corporation allocation required by § 1.960-2(e)) (for formula see § 1.960-2(g)(1)(iii)(A)(2) (i) and (ii)): 

Tax paid by A Corporation on earnings previously taxed with respect to B Corporation or lower tiers which is deemed paid by N Corporation:$$

     ($116/$116x$29)...................................    $29.00  Tax paid by A Corporation on earnings not   previously taxed with respect to B Corporation or   lower tiers which is deemed paid by N   Corporation: 

$$

     ($84/$124x$106)...................................    $71.81  Taxes (paid by B Corporation) deemed paid by A   Corporation allocation required by § 1.960-   2(e):  ($36/$36x$5)......................................      5.00  ($84/$124x$17.62).................................     11.94  (for formula see § 1.960-2(g)(1)(iii)(B)(2)   (i) and (ii))  Taxes (of C Corporation) deemed paid by B               1.38   Corporation deemed paid by A Corporation ($84/   $124x$2.04)......................................                                                     -----------  (for formula see § 1.960-2(g)(1)(iii)(C)(1))    Total taxes deemed paid by N Corporation under section       $119.13     902(a) credit............................................                                                     -----------    Total foreign income taxes deemed paid by N         206.09     Corporation under section 901..................                                                     =========== 

(g) Formulas. This paragraph contains formulas for determining a domestic corporation's section 902 and 960 credits when amounts distributed through a chain of ownership have been included in whole or in part in the gross income of a domestic corporation under section 951 with respect to first-, second-, third-, or lower-tier corporations. (1) Determination of the section 902 credit—(i) Section 902(b)(2) credit. If the second-tier corporation receives a dividend from a third-tier corporation attributable in whole or in part to amounts included in a domestic corporation's gross income under section 951 with respect to the third- or lower-tier corporations, the second-tier corporation's credit for taxes paid by the third-tier corporation under section 902(b)(2) is determined as follows: (A) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (B) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— (1) Credit for tax paid by third-tier corporation on earnings included in domestic corporation's gross income with respect to fourth- or lower-tier corporations— $$ (2) Credit for tax paid by third-tier corporation on earnings not included in domestic corporation's gross income with respect to fourth- or lower-tier corporations— $$ (ii) Section 902(b)(1) credit. If the first-tier corporation receives a dividend from a second-tier corporation attributable in a whole or in part to amounts included in a domestic corporation's gross income under section 951 with respect to the second- or lower-tier corporations, the first-tier corporation's credit for taxes paid and deemed paid by the second-tier corporation under section 902(b)(1) is determined as follows: (A) Taxes paid by the second-tier corporation which are deemed paid by the first-tier corporation—(1) If the effective rate of tax on dividends received by the second-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the second-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— (i) Credit for tax paid by second-tier corporation on earnings previously taxed with respect to third- or lower-tier corporations— $$ (ii) Credit for tax paid by second-tier corporation on earnings not previously taxed with respect to third- or lower-tier corporations— $$ (B) Taxes deemed paid by the second-tier corporation which are deemed paid by the first-tier corporation—(1) If the effective rate of tax dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— (i) Credit for tax paid by third-tier corporation on earnings previously taxed with respect to fourth- or lower-tier corporations— $$ (ii) Credit for tax paid by third-tier corporation on earnings not previously taxed with respect to fourth- or lower-tier corporations— $$ (iii) Section 902(a) credit. If the domestic corporation receives a dividend from a first-tier corporation attributable in whole or in part to amounts included in a domestic corporation's gross income under section 951 with respect to the first- or lower-tier corporations, the domestic corporation's credit for taxes paid and deemed paid by the first-tier corporation under section 902(a) is determined as follows: (A) Taxes paid by the first-tier corporation which are deemed paid by domestic corporation—(1) If the effective rate of tax on dividends received by the first-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the first-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— (i) Credit for tax paid by first-tier corporation on earnings previously taxed with respect to second- or lower-tier corporations— $$ (ii) Credit for tax paid by first-tier corporation on earnings not previously taxed with respect to second- or lower-tier corporations— $$ (B) Taxes (paid by second-tier corporation) deemed paid by first-tier corporation which are deemed paid by domestic corporation—(1) If the effective rate of tax on dividends received by the second-tier corporation is the same as its tax rate on other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the second-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— (i) Credit for tax paid by second-tier corporation on earnings previously taxed with respect to third-tier or lower-tier corporations— $$ (ii) Credit for tax paid by second-tier corporation on earnings not previously taxed with respect to third- or lower-tier corporations— $$ (C) Taxes (of third-tier corporation) deemed paid by first-tier corporation which are deemed paid by domestic corporation—(1) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— (i) Credit for tax (of third-tier corporation) deemed paid by second-tier corporation on earnings previously taxed with respect to fourth- or lower-tier corporations— $$ (ii) Credit for tax (of third-tier corporation) deemed paid by second-tier on earnings not previously taxed with respect to fourth- or lower-tier corporations— $$ (2) Determination of domestic corporation's section 960 credit for amounts included in its gross income with respect to a first-, second-, or third-tier corporation which has received a distribution previously included in the gross income of a domestic corporation under section 951—(i) Third-tier credit. If a domestic corporation is required to include an amount in its gross income under section 951 with respect to a third-tier corporation which has received a distribution from a fourth-tier corporation of amounts included in a domestic corporation's gross income under section 951 with respect to the fourth- or lower-tier corporations, the domestic corporation's credit for taxes paid by the third-tier corporation under section 960(a)(1) is determined as follows: (A) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (B) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— $$ (ii) Second-tier credit. If a domestic corporation is required to include an amount in its gross income under section 951 with respect to a second-tier corporation which has received a distribution from a third-tier corporation of amounts included in a domestic corporation's gross income under section 951 with respect to the third- or lower-tier corporations, the domestic corporation's credit for taxes paid and deemed paid by the second-tier corporation under section 960(a)(1) is determined as follows: (A) Credit for taxes paid by the second-tier corporation which are deemed paid by the domestic corporation. (1) If the effective rate of tax on dividends received by the second-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the second-tier is higher or lower than the effective rate of tax on its other earnings and profits— $$ (B) Credit for taxes (of the third-tier corporation) deemed paid by the second-tier corporation under section 902(b)(2)—(1) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— $$ (iii) First-tier credit. If a domestic corporation is required to include amounts in its gross income under section 951 with respect to a first-tier corporation which has received a distribution from a second-tier corporation of amounts included in a domestic corporation's gross income under section 951 with respect to the second- or lower-tier corporations, the domestic corporation's credit for taxes paid and deemed paid by the first-tier corporation under section 960(a)(1) shall be determined as follows: (A) Credit for taxes paid by the first-tier corporation. (1) If the effective rate of tax on dividends received by the first-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the first-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— $$ (B) Credit for taxes paid by the second-tier corporation deemed paid by the first-tier corporation under section 902(b)(1). (1) If the effective rate of tax on dividends received by the second-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the second-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— $$ (C) Credit for taxes (of the third-tier corporation) deemed paid by the second-tier corporation which are deemed paid by first-tier corporation under section 902(b)(1). (1) If the effective rate of tax on dividends received by the third-tier corporation is the same as the effective rate of tax on its other earnings and profits— $$ (2) If the effective rate of tax on dividends received by the third-tier corporation is higher or lower than the effective rate of tax on its other earnings and profits— $$ [T.D. 7120, 36 FR 10854, June 4, 1971; 36 FR 11924, June 23, 1971, as amended by T.D. 7334, 39 FR 44212, Dec. 23, 1974; 40 FR 1014, Jan. 6, 1975; 40 FR 2802, Jan. 16, 1975; T.D. 7649, 44 FR 60089, Oct. 18, 1979; T.D. 7843, 47 FR 50476, Nov. 8, 1982; 47 FR 55477, Dec. 10, 1982] Browse Previous |  Browse Next ChanRobles Legal Resources: Jurisprudence, Laws, Statutes & Codes Philippine Laws, Statutes & Codes Philippine Supreme Court Decisions Significant Legal Resources WorldWide Legal Recources US Federal Laws, Statutes & Codes US Supreme Court Decisions The Business Page ChanRobles Virtual Law Library ChanRobles On-Line Bar Review ChanRobles MCLE On-line