Treasury Regulations, Subchapter A, Sec. 1.861-9
From TaxAlmanac
Sec. 1.861-9 Allocation and apportionment of interest expense
(a) through (g)(1)(i) [Reserved]. For further guidance, see §1.861–9T(a) through (g)(1)(i).
(g)(1)(ii) [Reserved]. For further guidance, see the second sentence in §1.861–9T(g)(1)(ii).
(g)(1)(iii) through (h)(4) [Reserved]. For further guidance, see §1.861–9T(g)(1)(iii) through (h)(4).
(h)(5) Characterizing stock in related persons—(i) General rule. Stock in a related person held by the taxpayer or by another related person shall be characterized on the basis of the fair market value of the taxpayer's pro rata share of assets held by the related person attributed to each statutory grouping and the residual grouping under the stock characterization rules of §1.861–12T(c)(3)(ii), except that the portion of the value of intangible assets of the taxpayer and related persons that is apportioned to the related person under §1.861–9T(h)(2) shall be characterized on the basis of the net income before interest expense of the related person within each statutory grouping or residual grouping (excluding income that is passive under §1.904–4(b)).
(ii) Special rule for section 936 corporations regarding alternative minimum tax. For purposes of characterizing stock in a related section 936 corporation in determining foreign source alternative minimum taxable income within each separate category and the alternative minimum tax foreign tax credit pursuant to section 59(a), the rules of §1.861–9T(g)(3) shall apply and §1.861–9(h)(5)(i) shall not apply. Thus, for taxable years beginning after December 31, 1989, and before January 1, 1994, stock in a related section 936 corporation is characterized for alternative minimum tax purposes as a foreign source passive asset because the stock produces foreign source passive dividend income under sections 861(a)(2)(A), 862(a)(2), and 904(d)(2)(A) and the regulations under those sections. For taxable years beginning after December 31, 1993, stock in a related section 936 corporation would be characterized for alternative minimum tax purposes as an asset subject to the separate limitation for section 936 corporation dividends because the stock produces foreign source dividend income that, for alternative minimum tax purposes, is subject to a separate foreign tax credit limitation under section 56(g)(4)(C)(iii)(IV). However, stock in a section 936 corporation is characterized as a U.S. source asset to the extent required by section 904(g). For the definition of the term section 936 corporation, see §1.861–11(d)(2)(ii).
(iii) Effective date. This paragraph (h)(5) applies to taxable years beginning after December 31, 1989.
(h)(6) through (j) [Reserved]. For further guidance, see §1.861–9T(h)(6) through (j).
[T.D. 8916, 66 FR 272, Jan. 3, 2001, as amended by T.D. 9120, 69 FR 15675, Mar. 26, 2004]
