Proposed Rule2022-27055
Single-Entity Treatment of Consolidated Groups for Specific Purposes
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 14, 2022
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains proposed regulations that treat members of a consolidated group as a single United States shareholder in certain cases for purposes of section 951(a)(2)(B) of the Internal Revenue Code (the "Code"). The proposed regulations affect consolidated groups that own stock of foreign corporations.
Full Text
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<title>Federal Register, Volume 87 Issue 239 (Wednesday, December 14, 2022)</title>
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[Federal Register Volume 87, Number 239 (Wednesday, December 14, 2022)]
[Proposed Rules]
[Pages 76430-76434]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-27055]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-113839-22]
RIN 1545-BQ51
Single-Entity Treatment of Consolidated Groups for Specific
Purposes
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations that treat members
of a consolidated group as a single United States shareholder in
certain cases for purposes of section 951(a)(2)(B) of the Internal
Revenue Code (the ``Code''). The proposed regulations affect
consolidated groups that own stock of foreign corporations.
DATES: Written or electronic comments and requests for a public hearing
must be received by January 18, 2023. Requests for a public hearing
must be submitted as prescribed in the ``Comments and Requests for a
Public Hearing'' section.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically. Submit electronic submissions via the Federal
eRulemaking Portal at <a href="http://www.regulations.gov">www.regulations.gov</a> (indicate IRS and REG-113839-
22) by following the online instructions for submitting comments. Once
submitted to the Federal eRulemaking Portal, comments cannot be edited
or withdrawn. The Department of the Treasury (``Treasury Department'')
and the IRS will publish for public availability any comment submitted
electronically or on paper to its public docket. Send paper submissions
to: CC:PA:LPD:PR (REG-113839-22), Room 5203, Internal Revenue Service,
PO Box 7604, Ben Franklin Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Austin Diamond-Jones, (202) 317-5085
(Corporate) and Julie T. Wang, (202) 317-6975 (Corporate) regarding
section 1502 and the proposed amendments to Sec. 1.1502-80, and Joshua
P. Roffenbender, (202) 317-6934 (International) regarding sections 951,
951A, and 959; concerning submissions of comments and requests for a
public hearing, Vivian Hayes at (202) 317-6901 (not toll-free numbers)
or by email to <a href="/cdn-cgi/l/email-protection#bbcbced9d7d2d8d3dedac9d2d5dcc8fbd2c9c895dcd4cd"><span class="__cf_email__" data-cfemail="3f4f4a5d53565c575a5e4d5651584c7f564d4c11585049">[email protected]</span></a> (preferred).
SUPPLEMENTARY INFORMATION:
Background
I. Overview
This document contains proposed amendments to 26 CFR part 1 under
sections 1502 and 7805(a) of the Code (the ``proposed regulations'').
II. Sections 1501 and 1502
Pursuant to section 1501, an affiliated group of corporations may
elect to file a U.S. Federal income tax (``U.S. tax'') return on a
consolidated basis (such return, a ``consolidated return''). Groups
electing to file consolidated returns include all members' income items
on a single return, in lieu of filing separate returns for each member.
Section 1502 authorizes the Secretary of the Treasury or their
delegate (``Secretary'') to prescribe regulations for an affiliated
group of corporations that join in filing (or that are required to join
in filing) a consolidated return (such a group, a ``consolidated
group,'' as defined in Sec. 1.1502-1(h)) to clearly reflect the U.S.
tax liability of the consolidated group and to prevent avoidance of
such tax liability. For purposes of carrying out those objectives,
section 1502 also permits the Secretary to prescribe rules that may be
different from the provisions of chapter 1 of subtitle A of the Code
that would apply if the corporations composing the consolidated group
filed separate returns. Terms used in the consolidated return
regulations generally are defined in Sec. 1.1502-1.
III. Sections 951(a)(1)(A), 951A(a), and 959
Sections 951(a)(1)(A) and 951A(a) subject each United States
shareholder (within the meaning of section 951(b) or section
953(c)(1)(A), if applicable) (each shareholder, a ``U.S. shareholder'')
of a controlled foreign corporation (within the meaning of section 957
or section 953(c)(1)(B), if applicable) (a ``CFC'') to
[[Page 76431]]
U.S. tax on certain income of the CFC, regardless of whether the CFC
distributes the earnings and profits (``E&P'') attributable to such
income. To avoid double taxation, a corresponding amount of the CFC's
E&P is designated as previously taxed earnings and profits (``PTEP'')
under section 959 and generally is not subject to U.S. tax at the U.S.
shareholder level when distributed, whether to a U.S. shareholder or to
an upper-tier CFC (such a distribution to a U.S. shareholder or an
upper-tier CFC, a ``section 959(a) distribution'' or a ``section 959(b)
distribution,'' respectively). See section 959. Generally, PTEP is
treated as distributed before E&P that is not PTEP (``non-PTEP''), and
a section 959(a) distribution is treated as not a dividend. See section
959(c) and (d).
Under section 951(a)(1)(A), a U.S. shareholder of a CFC must
include in gross income its pro rata share of the CFC's subpart F
income (as defined in section 952) if the U.S. shareholder owns (within
the meaning of section 958(a)) stock of the CFC on the last day of the
CFC's taxable year on which it is a CFC (the ``last relevant day'').
Ownership of stock within the meaning of section 958(a) means stock
owned directly and stock owned indirectly through foreign corporations
and other foreign entities (including certain domestic entities to the
extent treated as foreign entities under Sec. 1.958-1(d)(1)). For
purposes of the remainder of this preamble, a reference to stock
ownership means stock owned within the meaning of section 958(a).
A U.S. shareholder's pro rata share of a CFC's subpart F income for
a taxable year of the CFC is calculated by first determining the amount
described in section 951(a)(2)(A). This amount, which is determined
based on the U.S. shareholder's proportionate share of a hypothetical
distribution by the CFC, represents subpart F income (unreduced by
distributions during the taxable year) allocable to stock of the CFC
that the U.S. shareholder owns on the last relevant day. See section
951(a)(2)(A); Sec. 1.951-1(b) and (e). That amount is then reduced by
the amount described in section 951(a)(2)(B) to arrive at the U.S.
shareholder's pro rata share of the CFC's subpart F income. For a
discussion of section 951(a)(2)(B), see part IV of this Background
section.
Section 951A(a) requires a U.S. shareholder of a CFC to include in
gross income its GILTI inclusion amount. See Sec. 1.951A-1(b). A U.S.
shareholder's GILTI inclusion amount is determined by taking into
account the U.S. shareholder's pro rata share of tested items (as
defined in Sec. 1.951A-1(f)(5)) of certain CFCs in which the U.S.
shareholder owns stock, such as tested income, tested loss, and
qualified business asset investment. A U.S. shareholder's pro rata
share of a CFC's tested items is determined in the same manner as a
U.S. shareholder's pro rata share of a CFC's subpart F income under
section 951(a)(2), subject to certain modifications. See section
951A(e)(1) and Sec. 1.951A-1(d).
In many cases, a significant portion of a CFC's income has been (or
will be) subject to U.S. tax under section 951(a)(1)(A) or 951A(a),
including by reason of the transition tax imposed under section 965,
which taxed non-PTEP of certain foreign corporations under section
951(a)(1)(A). As a result, there is (and will continue to be) a
substantial amount of PTEP in the U.S. tax system.
IV. Section 951(a)(2)(B)
Section 951(a)(2)(B) addresses cases in which stock of a CFC owned
by a U.S. shareholder on the last relevant day was acquired by the U.S.
shareholder during the CFC's taxable year. In these cases, section
951(a)(2)(B) generally reduces the U.S. shareholder's pro rata share of
the CFC's subpart F income or tested income by the amount of
distributions received by any other person during the taxable year as a
dividend with respect to the acquired stock. However, the reduction is
limited to the amount of the dividend that would have been received
with respect to the acquired stock if the CFC had distributed an amount
equal to its subpart F income for the taxable year multiplied by a
fraction, the numerator of which is the number of days during the
taxable year on which the U.S. shareholder did not own the acquired
stock, and the denominator of which is the number of days during the
taxable year (such fraction, the ``section 951(a)(2)(B) fraction'').
The reduction, as so limited, represents an amount of distributed
income of the CFC on which the U.S. shareholder otherwise would be
subject to U.S. tax under section 951(a)(1)(A) or 951A(a) by reason of
owning the acquired stock on the last relevant day, but that is not
allocable to the period during which the U.S. shareholder owned the
acquired stock. The reduction is intended to prevent double taxation of
subpart F income or tested income of the CFC that is distributed during
the taxable year. In turn, the limitation on the reduction is intended
to ensure that income allocable to the U.S. shareholder's ownership
period with respect to the acquired stock is included in the U.S.
shareholder's pro rata share. See generally Technical Explanation of
the Revenue Act of 1962, S. Rep. No. 87-1881, at 239 (1962).
V. Application of Sections 951(a)(1)(A) and 951A(a) to Consolidated
Groups
A consolidated group member's inclusion under section 951(a)(1)(A)
is determined at the member level in the same manner as the inclusion
is determined for any domestic corporation that is a U.S. shareholder
of a foreign corporation.
A member's GILTI inclusion amount is determined by taking into
account the aggregate of its pro rata share of the tested income of
each tested income CFC (as defined in Sec. 1.951A-2(b)(1)) and its
allocable share of the group's aggregate amount of other tested items.
See Sec. 1.1502-51. As explained in the preamble to the final
regulations in Sec. 1.1502-51, determining a member's GILTI inclusion
amount entirely on a separate-entity basis would undermine the clear
reflection of the U.S. tax liability of the consolidated group as a
whole. In contrast, the adopted approach creates ``consistent results
regardless of which member of a consolidated group owns the stock of
the CFCs[,] . . . removes incentives for inappropriate planning, and
also eliminates traps for the unwary.'' See TD 9866, 84 FR 29288,
29318.
Explanation of Provisions
I. In General
The Treasury Department and the IRS are aware that some
consolidated groups are taking the position that the group's aggregate
inclusions under sections 951(a)(1)(A) and 951A(a) are reduced by
changing the location of ownership of stock of a CFC within the group.
Specifically, taxpayers are taking the position that a group's
aggregate pro rata share of a lower-tier CFC's subpart F income or
tested income is reduced under section 951(a)(2)(B) by reason of a
section 959(b) distribution made by the lower-tier CFC, together with a
direct or indirect acquisition of stock of the lower-tier CFC by a
member from another member. Given the substantial amount of PTEP in the
U.S. tax system following the enactment of sections 951A and 965, the
Treasury Department and the IRS understand that taxpayers are taking
this position with increasing frequency in an attempt to significantly
reduce their income inclusions under sections 951(a)(1)(A) and 951A(a).
For example, assume that M1 and M2 are members of a consolidated
group (the ``P group''). M1 directly owns all the stock of an upper-
tier CFC (``CFC1''), which directly owns all the stock of a
[[Page 76432]]
lower-tier CFC (``CFC2''). M2 directly owns all the stock of another
CFC (``CFC3''). During a taxable year of CFC2, CFC2 makes a section
959(b) distribution to CFC1. On a day other than the last day of the
same taxable year, CFC1 transfers all the stock of CFC2 to CFC3 in a
transaction that qualifies as a reorganization described in section
368(a)(1)(B). As a result, M2 indirectly acquires stock of CFC2, which
M2 continues to own throughout the rest of the taxable year.
The Treasury Department and the IRS understand that some
consolidated groups are taking the position that section 951(a)(2)(B)
reduces M2's pro rata share of CFC2's subpart F income or tested
income. This position is based in part on the assertion that, for
purposes of the section 951(a)(2)(B) fraction, M2 is not treated as
owning stock of CFC2 on days on which the stock is owned by M1 (or
another member of the group).
This position does not clearly reflect a consolidated group's U.S.
tax liability. The group's aggregate pro rata shares of subpart F
income and tested income of a CFC--and thus the group's aggregate
inclusions under sections 951(a)(1)(A) and 951A(a), respectively--
should not be affected when ownership of stock of the CFC moves within
the group.
In addition, this position is inconsistent with section
951(a)(2)(B) and the purposes of that provision. The amount described
in section 951(a)(2)(B) represents certain distributed income of a CFC
on which a U.S. shareholder otherwise would be subject to U.S. tax
under section 951(a)(1)(A) or 951A(a) by reason of owning stock of the
CFC on the last relevant day. E&P that already has been subject to U.S.
tax, such as E&P comprising a section 959(b) distribution, cannot
represent such income. A position treating such E&P as giving rise to a
section 951(a)(2)(B) reduction inappropriately reduces U.S. taxation of
a CFC's subpart F income or tested income. Furthermore, the reduction
to U.S. tax could be permanent to the extent that a deduction under
section 245A(a) is allowed when E&P corresponding to the untaxed income
ultimately is distributed to a U.S. shareholder.
To address the inappropriate outcomes claimed under this position
and to clearly reflect a consolidated group's U.S. tax liability, the
proposed regulations treat members of a consolidated group as a single
U.S. shareholder for certain purposes, as described in part II of this
Explanation of Provisions section. As described in part IV of this
Explanation of Provisions, the Treasury Department and the IRS are
further considering the interaction of sections 951(a)(2)(B) and
959(b).
II. Consolidated Groups Treated as a Single U.S. Shareholder for
Purposes of Applying Section 951(a)(2)(B) With Respect to Section
959(b) Distributions
The proposed regulations treat members of a consolidated group as a
single U.S. shareholder for purposes of applying section 951(a)(2)(B)
in the context of section 959(b) distributions. See proposed Sec.
1.1502-80(j)(1). When members are treated as a single U.S. shareholder,
direct or indirect acquisitions of stock of a CFC by one member from
another member do not give rise to a section 951(a)(2)(B) reduction,
because the numerator of the section 951(a)(2)(B) fraction reflects the
period that both members owned stock of the CFC. As a result, the
group's aggregate inclusions under sections 951(a)(1)(A) and 951A(a)
with respect to a CFC are not reduced under section 951(a)(2)(B) by
reason of a section 959(b) distribution made by the CFC and changes in
the location of ownership of stock of the CFC within the group. See
proposed Sec. 1.1502-80(j)(2), Example 1 and Example 2. The Treasury
Department and the IRS have determined that this outcome facilitates
the clear reflection of the U.S. tax liability of a consolidated group.
The proposed regulations do not apply in the context of dividends
composed of non-PTEP. When such a dividend gives rise to a reduction
under section 951(a)(2)(B), other rules may result in the dividend
being (directly or indirectly) included in the gross income of a U.S.
shareholder. See, e.g., Sec. 1.245A-5 (limiting the deduction under
section 245A(a) and the look-through exception to subpart F income
under section 954(c)(6)).
In addition to the proposed regulations, other authorities or
common law doctrines may apply to recast a transaction or otherwise
affect the tax treatment of a transaction. See, e.g., sections 482 and
7701(o) and Sec. Sec. 1.701-2 and 1.1502-13(h).
III. Applicability Date
The proposed regulations are proposed to apply to taxable years for
which the original consolidated return is due (without extensions)
after the date of publication in the Federal Register of a Treasury
Decision adopting these rules as final regulations. See section
1503(a).
IV. No Inference
No inference is intended with regard to the treatment of
transactions involving a consolidated group before the applicability
date of the proposed regulations, including under Sec. 1.1502-13.
Additionally, no inference is intended with regard to the treatment of
similar transactions not involving a consolidated group, or with regard
to whether section 959(b) distributions are taken into account under
section 951(a)(2)(B). The Treasury Department and the IRS are further
considering the interaction of sections 951(a)(2)(B) and 959(b), and
any additional guidance issued relating to those sections, including
guidance to prevent abuse, may be retroactive.
Special Analyses
I. Regulatory Planning and Review--Economic Analysis
The Administrator of the Office of Information and Regulatory
Affairs (``OIRA''), Office of Management and Budget, has determined
that this proposed rule is not a significant regulatory action, as that
term is defined in section 3(f) of Executive Order 12866. Therefore,
OIRA has not reviewed this proposed rule pursuant to section 6(a)(3)(A)
of Executive Order 12866 and the April 11, 2018, Memorandum of
Agreement between the Treasury Department and the Office of Management
and Budget (``OMB'').
II. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that these proposed regulations will not have a
significant economic impact on a substantial number of small entities.
This certification is based on the fact that these proposed regulations
apply only to corporations that file consolidated Federal income tax
returns, and that such corporations almost exclusively consist of
larger businesses. Specifically, based on data available to the IRS,
corporations that file consolidated Federal income tax returns
represent only approximately two percent of all filers of Forms 1120
(U.S. Corporation Income Tax Return). However, these consolidated
Federal income tax returns account for approximately 95 percent of the
aggregate amount of receipts provided on all Forms 1120. Therefore,
these proposed regulations would not create additional obligations for,
or impose an economic impact on, small entities. Accordingly, the
Secretary certifies that the proposed regulations will not have a
significant economic impact on a substantial number of small entities.
III. Section 7805(f)
Pursuant to section 7805(f), this notice of proposed rulemaking has
been
[[Page 76433]]
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a state,
local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2022, that threshold is approximately $165 million. These
proposed regulations do not include any Federal mandate that may result
in expenditures by state, local, or tribal governments, or by the
private sector in excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial, direct compliance costs on state and local
governments, and is not required by statute, or preempts state law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive Order. These proposed regulations do not
have federalism implications and do not impose substantial direct
compliance costs on State and local governments or preempt State law
within the meaning of the Executive Order.
Comments and Requests for a Public Hearing
Before the proposed regulations are adopted as final regulations,
consideration will be given to comments that are submitted timely to
the IRS as prescribed in the preamble under the ADDRESSES section. The
Treasury Department and the IRS request comments on all aspects of the
proposed regulations. In addition, the Treasury Department and the IRS
continue to study different applications of section 951(a)(2)(B) when
CFC interests have been transferred in intercompany transactions and
request comments on the interaction of section 951(a)(2)(B) and Sec.
1.1502-13. Any comments submitted will be made available at
<a href="http://www.regulations.gov">www.regulations.gov</a> or upon request.
A public hearing will be scheduled if requested in writing by any
person who timely submits electronic or written comments. Requests for
a public hearing are encouraged to be made electronically. If a public
hearing is scheduled, notice of the date and time for the public
hearing will be published in the Federal Register. Announcement 2020-4,
2020-17 IRB 1, provides that until further notice, public hearings
conducted by the IRS will be held telephonically. Any telephonic
hearing will be made accessible to people with disabilities.
Statement of Availability of IRS Documents
Any IRS Revenue Procedures, Revenue Rulings, Notices, or other
guidance cited in this document are published in the Internal Revenue
Bulletin (or Cumulative Bulletin) and are available from the
Superintendent of Documents, U.S. Government Publishing Office,
Washington, DC 20402, or by visiting the IRS website at <a href="http://www.irs.gov">www.irs.gov</a>.
Drafting Information
The principal authors of these regulations are Joshua P.
Roffenbender, Office of Associate Chief Counsel (International), and
Jeremy Aron-Dine and Gregory J. Galvin, Office of Associate Chief
Counsel (Corporate). However, other personnel from the IRS and the
Treasury Department participated in their development.
List of Subjects in 26 CFR Part 1
Income Taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, the Treasury Department and the IRS propose to amend
26 CFR part 1 as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. In Sec. 1.1502-80, paragraphs (i) and (j) are added to read as
follows:
Sec. 1.1502-80 Applicability of other provisions of law.
* * * * *
(i) [Reserved]
(j) Special rules for application of section 951(a)(2)(B) to
distributions to which section 959(b) applies--(1) Single United States
shareholder treatment. In determining the amount described in section
951(a)(2)(B) that is attributable to distributions to which section
959(b) applies, members of a group are treated as a single United
States shareholder (within the meaning of section 951(b) (or section
953(c)(1)(A), if applicable)) for purposes of determining the part of
the year during which such shareholder did not own (within the meaning
of section 958(a)) the stock described in section 951(a)(2)(A). The
purpose of this paragraph (j) is to facilitate the clear reflection of
income of a consolidated group by ensuring that the location of
ownership of stock of a foreign corporation within the group does not
affect the amount of the group's income by reason of sections
951(a)(1)(A) and 951A(a).
(2) Examples. The following examples illustrate the application of
paragraph (j)(1) of this section. For purposes of the examples in this
paragraph (j)(2): M1 and M2 are members of a consolidated group of
which P is the common parent (P group); each of CFC1, CFC2, and CFC3 is
a controlled foreign corporation (within the meaning of section 957(a))
with the U.S. dollar as its functional currency (within the meaning of
section 985); the taxable year of all entities is the calendar year for
Federal income tax purposes; and a reference to stock owned means stock
owned within the meaning of section 958(a). These examples do not
address common law doctrines or other authorities that might apply to
recast a transaction or to otherwise affect the tax treatment of a
transaction.
(i) Example 1. Intercompany transfer of stock of a controlled
foreign corporation--(A) Facts. Throughout Year 1, M1 directly owns all
the stock of CFC1, which directly owns all the stock of CFC2. In Year
1, CFC2 has $100x of subpart F income (as defined in section 952). M1's
pro rata share of CFC2's subpart F income for Year 1 is $100x, which M1
includes in its gross income under section 951(a)(1)(A). In Year 2,
CFC2 has $80x of subpart F income and distributes $80x to CFC1 (the
CFC2 Distribution). Section 959(b) applies to the entire CFC2
Distribution. On December 29, Year 2, M1 transfers all of its CFC1
stock to M2 in an exchange described in section 351(a). As a result, on
December 31, Year 2 (the last day of Year 2 on which CFC2 is a
controlled foreign corporation), M2 owns 100% of the stock of CFC1,
which owns 100% of the stock of CFC2.
(B) Analysis. Under paragraph (j)(1) of this section, in
determining the amount described in section 951(a)(2)(B) that is
attributable to the CFC2 Distribution, all members of the P group are
treated as a single United States shareholder for purposes of
determining the part of Year 2 during which such shareholder did not
own the stock of CFC2. Thus, the ratio of the number of days in Year 2
that such United States shareholder did not own the stock of CFC2 to
the total number of days in Year 2 is 0/365. The
[[Page 76434]]
amount described in section 951(a)(2)(B) is $0, M2's pro rata share of
CFC2's subpart F income for Year 2 is $80x ($80x--$0), and M2 must
include $80x in its gross income under section 951(a)(1)(A).
(ii) Example 2. Transfer of stock of a controlled foreign
corporation between controlled foreign corporations--(A) Facts. The
facts are the same as the facts of Example 1, except that M1 does not
transfer its CFC1 stock to M2. Additionally, throughout Year 1 and from
January 1, Year 2, to December 29, Year 2, M2 directly owns all 90
shares of the only class of stock of CFC3. Further, on December 29,
Year 2, CFC3 acquires all the CFC2 stock from CFC1 in exchange for 10
newly issued shares of the same class of CFC3 stock in a transaction
described in section 368(a)(1)(B). As a result, on December 31, Year 2,
M1 owns 10% of the stock of CFC2, and M2 owns 90% of the stock of CFC2.
(B) Analysis. Under paragraph (j)(1) of this section, in
determining the amount described in section 951(a)(2)(B) that is
attributable to the portion of the CFC2 Distribution with respect to
each of the CFC2 stock that M1 owns on December 31, Year 2, and the
CFC2 stock that M2 owns on that day, all members of the P group are
treated as a single United States shareholder for purposes of
determining the part of Year 2 during which such shareholder did not
own such stock. In each case, the ratio of the number of days in Year 2
that such United States shareholder did not own such stock to the total
number of days in Year 2 is 0/365, and the amount described in section
951(a)(2)(B) is $0. M1's and M2's pro rata shares of CFC2's subpart F
income for Year 2 are $8x ($8x - $0) and $72x ($72x - $0),
respectively, and M1 and M2 must include $8x and $72x in gross income
under section 951(a)(1)(A), respectively.
(3) Applicability date. This paragraph (j) applies to taxable years
for which the original consolidated Federal income tax return is due
(without extensions) after the date a Treasury decision adopting these
rules as final regulations is published in the Federal Register.
Melanie R. Krause,
Acting Deputy Commissioner for Services and Enforcement.
[FR Doc. 2022-27055 Filed 12-9-22; 11:15 am]
BILLING CODE 4830-01-P
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