Internal Revenue Code:Sec. 1502. Regulations

From TaxAlmanac

Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle A - Income Taxes
       CHAPTER 6 - CONSOLIDATED RETURNS
        Subchapter A - Returns and Payment of Tax
      

Statute

    Sec. 1502. Regulations
 
      The Secretary shall prescribe such regulations as he may deem
    necessary in order that the tax liability of any affiliated group
    of corporations making a consolidated return and of each
    corporation in the group, both during and after the period of
    affiliation, may be returned, determined, computed, assessed,
    collected, and adjusted, in such manner as clearly to reflect the
    income-tax liability and the various factors necessary for the
    determination of such liability, and in order to prevent avoidance
    of such tax liability. In carrying out the preceding sentence, the 
    Secretary may prescribe rules that are different from the 
    provisions of chapter 1 that would apply if such corporations filed
    separate returns.

 

Sources

    (Aug. 16, 1954, ch. 736, 68A Stat. 367; Pub. L. 94-455, title XIX,
    Sec. 1906(b) (13)(A), Oct. 4, 1976, 90 Stat. 1834.)
 

Miscellaneous

                                 AMENDMENTS
      2004 - Subsec.844(a),Pub.L.108-357, amended Sec.1502 by
    adding at the end the following new sentence: "In carrying out the
    preceding sentence, the Secretary may prescribe rules that are
    different from the provisions of chapter 1 that would apply if such
    corporations filed separate returns."  NOTE.--
    Result Not Overturned.--Notwithstanding the amendment made by 
    subsection (a), the Internal Revenue Code of 1986 shall be  
    construed by treating Treasury Regulation Sec. 1.1502-20(c)(1)(iii)
   (as in effect on January 1, 2001) as being inapplicable to the
    factual situation in Rite Aid Corporation and Subsidiary 
    Corporations v. United States, 255 F.3d 1357 (Fed. Cir. 2001).

    Effective Date.-- The amendment made by this section,Sec. 844,  
    PL108-357, shall apply to taxable years beginning before, on, or
    after the date of the  enactment of this Act.
    
      1976 - Pub. L. 94-455 struck out ''or his delegate'' after
    ''Secretary''.
    
                          DUAL RESIDENT COMPANIES
      Pub. L. 100-647, title VI, Sec. 6126, Nov. 10, 1988, 102 Stat.
    3713, provided that:
      ''(a) General Rule. - In the case of a transaction which -
        ''(1) involves the transfer after the date of the enactment of
      this Act (Nov. 10, 1988) by a domestic corporation, with respect
      to which there is a qualified excess loss account, of its assets
      and liabilities to a foreign corporation in exchange for all of
      the stock of such foreign corporation, followed by the complete
      liquidation of the domestic corporation into the common parent,
      and
        ''(2) qualifies, pursuant to Revenue Ruling 87-27, as a
      reorganization which is described in section 368(a)(1)(F) of the
      1986 Code,
    then, solely for purposes of applying Treasury Regulation section
    1.1502-19 to such qualified excess loss account, such foreign
    corporation shall be treated as a domestic corporation in
    determining whether such foreign corporation is a member of the
    affiliated group of the common parent.
      ''(b) Treatment of Income of New Foreign Corporation. -
        ''(1) In general. - In any case to which subsection (a)
      applies, for purposes of the 1986 Code -
          ''(A) the source and character of any item of income of the
        foreign corporation referred to in subsection (a) shall be
        determined as if such foreign corporation were a domestic
        corporation,
          ''(B) the net amount of any such income shall be treated as
        subpart F income (without regard to section 952(c) of the 1986
        Code), and
          ''(C) the amount in the qualified excess loss account
        referred to in subsection (a) shall -
            ''(i) be reduced by the net amount of any such income, and
            ''(ii) be increased by the amount of any such income
          distributed directly or indirectly to the common parent
          described in subsection (a).
        ''(2) Limitation. - Paragraph (1) shall apply to any item of
      income only to the extent that the net amount of such income does
      not exceed the amount in the qualified excess loss account after
      being reduced under paragraph (1)(C) for prior income.
        ''(3) Basis adjustments not applicable. - To the extent
      paragraph (1) applies to any item of income, there shall be no
      increase in basis under section 961(a) of such Code on account of
      such income (and there shall be no reduction in basis under
      section 961(b) of such Code on account of an exclusion
      attributable to the inclusion of such income).
        ''(4) Recognition of gain. - For purposes of paragraph (1), if
      the foreign corporation referred to in subsection (a) transfers
      any property acquired by such foreign corporation in the
      transaction referred to in subsection (a) (or transfers any other
      property the basis of which is determined in whole or in part by
      reference to the basis of property so acquired) and (but for this
      paragraph) there is not full recognition of gain on such
      transfer, the excess (if any) of -
          ''(A) the fair market value of the property transferred, over
          ''(B) its adjusted basis,
      shall be treated as gain from the sale or exchange of such
      property and shall be recognized notwithstanding any other
      provision of law.  Proper adjustment shall be made to the basis
      of any such property for gain recognized under the preceding
      sentence.
      ''(c) Definitions. - For purposes of this section -
        ''(1) Common parent. - The term 'common parent' means the
      common parent of the affiliated group which included the domestic
      corporation referred to in subsection (a)(1).
        ''(2) Qualified excess loss account. - The term 'qualified
      excess loss account' means any excess loss account (within the
      meaning of the consolidated return regulations) to the extent
      such account is attributable -
          ''(A) to taxable years beginning before January 1, 1988, and
          ''(B) to periods during which the domestic corporation was
        subject to an income tax of a foreign country on its income on
        a residence basis or without regard to whether such income is
        from sources in or outside of such foreign country.
      The amount of such account shall be determined as of immediately
      after the transaction referred to in subsection (a) and without,
      except as provided in subsection (b), diminution for any future
      adjustment.
        ''(3) Net amount. - The net amount of any item of income is the
      amount of such income reduced by allocable deductions as
      determined under the rules of section 954(b)(5) of the 1986 Code.
        ''(4) Second same country corporation may be treated as
      domestic corporation in certain cases. - If -
          ''(A) another foreign corporation acquires from the common
        parent stock of the foreign corporation referred to in
        subsection (a) after the transaction referred to in subsection
        (a),
          ''(B) both of such foreign corporations are subject to the
        income tax of the same foreign country on a residence basis,
        and
          ''(C) such common parent complies with such reporting
        requirements as the Secretary of the Treasury or his delegate
        may prescribe for purposes of this paragraph,
      such other foreign corporation shall be treated as a domestic
      corporation in determining whether the foreign corporation
      referred to in subsection (a) is a member of the affiliated group
      referred to in subsection (a) (and the rules of subsection (b)
      shall apply (i) to any gain of such other foreign corporation on
      any disposition of such stock, and (ii) to any other income of
      such other foreign corporation except to the extent it
      establishes to the satisfaction of the Secretary of the Treasury
      or his delegate that such income is not attributable to property
      acquired from the foreign corporation referred to in subsection
      (a)).''
            SPECIAL RULE FOR DISPOSITION OF STOCK OF SUBSIDIARY
      Pub. L. 99-514, title VI, Sec. 647, Oct. 22, 1986, 100 Stat.
    2294, provided that: ''If for a taxable year of an affiliated group
    filing a consolidated return ending on or before December 31, 1987,
    there is a disposition of stock of a subsidiary (within the meaning
    of Treasury Regulation section 1.1502-19), the amount required to
    be included in income with respect to such disposition under
    Treasury Regulation section 1.1502-19(a) shall, notwithstanding
    such section, be included in income ratably over the 15-year period
    beginning with the taxable year in which the disposition occurs.
    The preceding sentence shall apply only if such subsidiary was
    incorporated on December 24, 1969, and is a participant in a
    mineral joint venture with a corporation organized under the laws
    of the foreign country in which the joint venture mineral project
    is located.''
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 1501, 1503 of this title.