Site Feedback

Title 26

You are viewing the current version of the eCFR. The eCFR is up to date as of 7/28/2021.
Federal Register documents have modified this content but those changes have not yet been applied to the eCFR and thus do not yet appear below. See the 'Cross Reference' blocks in the text of this content for more information.

Title 26

eCFR Content

Editorial codification of the general and permanent rules published in the Federal Register.

PART 1 - INCOME TAXES
Authority:

26 U.S.C 7805, unless otherwise noted.

Section 1.1(h)-1 also issued under 26 U.S.C. 1(h);

Section 1.21-1 also issued under 26 U.S.C. 21(f);

Section 1.21-2 also issued under 26 U.S.C. 21(f);

Section 1.21-3 also issued under 26 U.S.C. 21(f);

Section 1.21-4 also issued under 26 U.S.C. 21(f);

Section 1.25-1T also issued under 26 U.S.C. 25;

Section 1.25-2T also issued under 26 U.S.C. 25;

Section 1.25-3 also issued under 26 U.S.C. 25;

Section 1.25-3T also issued under 26 U.S.C. 25;

Section 1.25-4T also issued under 26 U.S.C. 25;

Section 1.25-5T also issued under 26 U.S.C. 25;

Section 1.25-6T also issued under 26 U.S.C. 25;

Section 1.25-7T also issued under 26 U.S.C. 25;

Section 1.25-8T also issued under 26 U.S.C. 25;

Section 1.25A-1 also issued under section 26 U.S.C. 25A(i);

Section 1.25A-2 also issued under section 26 U.S.C. 25A(i);

Section 1.25A-3 also issued under section 26 U.S.C. 25A(i);

Section 1.25A-4 also issued under section 26 U.S.C. 25A(i);

Section 1.25A-5 also issued under section 26 U.S.C. 25A(i);

Section 1.28-0 also issued under 26 U.S.C. 28(d)(5);

Section 1.28-1 also issued under 26 U.S.C. 28(d)(5);

Section 1.30-1 also issued under 26 U.S.C. 30(d)(2);

Section 1.36B-0 also issued under 26 U.S.C. 36B(g);

Section 1.36B-4 also issued under 26 U.S.C. 36B(g);

Section 1.36B-5 also issued under 26 U.S.C. 36B(g);

Section 1.41-4 also issued under 26 U.S.C. 41(d)(4)(E).

Section 1.41-6 also issued under 26 U.S.C. 41(f)(1) and 1502;

Section 1.41-8 also issued under 26 U.S.C. 41(c)(4)(B);

Section 1.41-8T also issued under 26 U.S.C. 41(c)(4)(B);

Section 1.41-9 also issued under 26 U.S.C. 41(c)(5)(C);

Section 1.41-9T also issued under 26 U.S.C. 41(c)(5)(C);

Section 1.42-1 also issued under 26 U.S.C. 42(n);

Section 1.42-1T also issued under 26 U.S.C. 42(n);

Section 1.42-3 also issued under 26 U.S.C. 42(n);

Section 1.42-4 also issued under 26 U.S.C. 42(n);

Section 1.42-5 also issued under 26 U.S.C. 42(n);

Sections 1.42-6, 1.42-8, 1.42-9, 1.42-10, 1.42-11, and 1.42-12, also issued under 26 U.S.C. 42(n);

Section 1.42-13 also issued under 26 U.S.C. 42(n);

Section 1.42-14 also issued under 26 U.S.C. 42(n);

Section 1.42-15 also issued under 26 U.S.C. 42(n);

Section 1.42-16 also issued under 26 U.S.C. 42(n);

Section 1.42-17 also issued under 26 U.S.C. 42(n);

Section 1.42-18 also issued under 26 U.S.C. 42(h)(6)(F) and 42(h)(6)(K);

Sections 1.43-0 - 1.43-7 also issued under section 26 U.S.C. 43;

Section 1.45D-1 also issued under 26 U.S.C. 45D(e)(2) and (i);

Section 1.45G-1 also issued under 26 U.S.C. 45G(e)(2);

Sections 1.45Q-1, 1.45Q-2, 1.45Q-3, 1.45Q-4, and 1.45Q-5 also issued under 26 U.S.C. 45Q(h).

Section 1.45Q-3 also issued under 26 U.S.C. 45Q(f)(2).

Section 1.45Q-4 also issued under 26 U.S.C. 45Q(f)(5).

Section 1.45Q-5 also issued under 26 U.S.C. 45Q(f)(4).

Section 1.46-5 also issued under 26 U.S.C. 46(d)(6) and 26 U.S.C. 47(a)(3)(C);

Section 1.46-6 also issued under 26 U.S.C. 46(f)(7);

Section 1.47-1 also issued under 26 U.S.C. 47(a);

Section 1.48-9 also issued under 26 U.S.C. 38(b) (as in effect before the amendments made by subtitle F of the Tax Reform Act of 1984);

Sections 1.50A - 1.50B also issued under 85 Stat. 553 (26 U.S.C. 40(b));

Section 1.52-1 also issued under 26 U.S.C. 52(b);

Section 1.56(g)-1 also issued under section 7611(g)(3) of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239, 103 Stat. 2373).

Section 1.59A-0 also issued under 26 U.S.C. 59A(i).

Section 1.59A-1 also issued under 26 U.S.C. 59A(i).

Section 1.59A-2 also issued under 26 U.S.C. 59A(i).

Section 1.59A-3 also issued under 26 U.S.C. 59A(i).

Section 1.59A-4 also issued under 26 U.S.C. 59A(i).

Section 1.59A-5 also issued under 26 U.S.C. 59A(i).

Section 1.59A-6 also issued under 26 U.S.C. 59A(i).

Section 1.59A-7 also issued under 26 U.S.C. 59A(i).

Section 1.59A-8 also issued under 26 U.S.C. 59A(i).

Section 1.59A-9 also issued under 26 U.S.C. 59A(i).

Section 1.59A-10 also issued under 26 U.S.C. 59A(i).

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.61-2T also issued under 26 U.S.C. 61.

Section 1.61-21 also issued under 26 U.S.C. 61.

Sections 1.62-1T and 1.62-2 also issued under 26 U.S.C. 62.

Section 1.66-4 also issued under 26 U.S.C. 66(c);

Sections 1.67-2T and 1.67-3T also issued under 26 U.S.C. 67(c).

Section 1.67-3 also issued under 26 U.S.C. 67(c).

Section 1.67-4 also issued under 26 U.S.C. 67(e).

Sections 1.72-4, 1.72-5, 1.72-6, 1.72-7, 1.72-8, and 1.72-11 also issued under 26 U.S.C. 72(c).

Section 1.78-1 also issued under 26 U.S.C. 245A(g).

Section 1.101-7 also issued under 26 U.S.C. 101(d)(2)(B)(ii).

Section 1.103-10 also issued under 26 U.S.C. 103(b)(6).

Section 1.103A-2 also issued under 26 U.S.C. 103A(j).

Section 1.108-1 also issued under 26 U.S.C. 108(e)(8) and 108(e)(10(B).

Section 1.108-2 also issued under 26 U.S.C. 108.

Section 1.108-3 also issued under 26 U.S.C. 108, 267, and 1502.

Section 1.108-4 also issued under 26 U.S.C. 108.

Section 1.108-5 also issued under 26 U.S.C. 108.

Section 1.108(c)-1 also issued under the authority of 26 U.S.C. 108(d)(9).

Section 1.108(i)-0 also issued under 26 U.S.C. 108(i)(7) and 1502.

Section 1.108(i)-1 also issued under 26 U.S.C. 108(i)(7) and 1502.

Section 1.108(i)-2 also issued under 26 U.S.C. 108(i)(7).

Section 1.108(i)-3 also issued under 26 U.S.C. 108(i)(7) and 1502.

Section 1.110-1 also issued under 26 U.S.C. 110(d).

Sections 1.132-0 through 1.132-8T also issued under 26 U.S.C. 132.

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.148-0 through 1.148-11 also issued under 26 U.S.C. 148(i).

Section 1.148-6 also issued under 26 U.S.C. 148 (f), (g), and (i).

Section 1.149(b)-1 also issued under 26 U.S.C. 149(b)(3)(B) (v).

Section 1.149(d)-1 also issued under 26 U.S.C. 149(d)(7).

Section 1.149(e)-1 also issued under 26 U.S.C. 149(e).

Section 1.149(g)-1 also issued under 26 U.S.C. 149(g)(5).

Section 1.150-4 also issued under 26 U.S.C. 150 (c)(5).

Section 1.152-4 also issued under 26 U.S.C. 152(e).

Section 1.162-24 also issued under 26 U.S.C. 162(h).

Section 1.162(k)-1 is also issued under section 26 U.S.C. 162(k).

Section 1.163-8T also issued under 26 U.S.C. 469(k)(4).

Section 1.163-9T also issued under 26 U.S.C. 163(h)(3)(D).

Section 1.163(j)-1 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502.

Section 1.163(j)-2 also issued under 26 U.S.C. 1502.

Section 1.163(j)-3 also issued under 26 U.S.C. 1502.

Section 1.163(j)-4 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502.

Section 1.163(j)-5 also issued under 26 U.S.C. 1502.

Section 1.163(j)-6 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502.

Section 1.163(j)-7 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502.

Section 1.163(j)-8 also issued under 26 U.S.C. 163(j)(8)(B).

Section 1.163(j)-9 also issued under 26 U.S.C. 163(j)(7)(B) and (C) and 26 U.S.C. 1502.

Section 1.163(j)-10 also issued under 26 U.S.C. 163(j)(8)(B) and 26 U.S.C. 1502.

Section 1.163(j)-11 also issued under 26 U.S.C. 1502.

Section 1.165-12 also issued under 26 U.S.C. 165(j)(3).

Section 1.166-10 also issued under 26 U.S.C. 166(f).

Section 1.168(d)-1 also issued under 26 U.S.C. 168(d)(3).

Section 1.168(f)(8)-1T also added under sec. 112(c), Black Lung Benefits Revenue Act of 1981 (Pub. L. 97-119).

Section 1.168(h)-1 also issued under 26 U.S.C. 168.

Section 1.168(i)-1 also issued under 26 U.S.C. 168(i)(4).

Section 1.168(i)-1T also issued under 26 U.S.C. 168(i)(4).

Section 1.168(i)-2 also issued under 26 U.S.C. 168.

Section 1.168(i)-4 also issued under 26 U.S.C. 168(i)(5).

Section 1.168(j)-1T also added under 26 U.S.C. 168(j)(10).

Authority:

26 U.S.C. 7805.

Section 1.170A-1 also issued under 26 U.S.C. 170(a).

Section 1.170A-6 also issued under 26 U.S.C. 170(f)(4); 26 U.S.C. 642(c)(5).

Section 1.170A-12 also issued under 26 U.S.C. 170(f)(4).

Section 1.170A-13 also issued under 26 U.S.C. 170(f)(8).

Section 1.170A-15 also issued under 26 U.S.C. 170(a)(1).

Section 1.170A-16 also issued under 26 U.S.C. 170(a)(1) and 170(f)(11).

Section 1.170A-17 also issued under 26 U.S.C. 170(a)(1) and 170(f)(11).

Section 1.170A-18 also issued under 26 U.S.C. 170(a)(1).

Section 1.171-2 also issued under 26 U.S.C. 171(e).

Section 1.171-3 also issued under 26 U.S.C. 171(e).

Section 1.171-4 also issued under 26 U.S.C. 171(c).

Section 1.179-1 also issued under 26 U.S.C. 179(d)(6) and (10).

Section 1.179-4 also issued under 26 U.S.C. 179(c).

Section 1.179-6 also issued under 26 U.S.C. 179(c).

Section 1.197-2 also issued under 26 U.S.C. 197.

Section 1.199A-1 also issued under 26 U.S.C. 199A(f)(4).

Section 1.199A-2 also issued under 26 U.S.C. 199A(b)(5), (f)(1)(A), (f)(4), and (h).

Section 1.199A-3 also issued under 26 U.S.C. 199A(c)(4)(C) and (f)(4).

Section 1.199A-4 also issued under 26 U.S.C. 199A(f)(4).

Section 1.199A-5 also issued under 26 U.S.C. 199A(f)(4).

Section 1.199A-6 also issued under 26 U.S.C. 199A(f)(1)(B) and (f)(4).

Section 1.199A-7 also issued under 26 U.S.C. 199A(f)(4) and (g)(6).

Section 1.199A-8 also issued under 26 U.S.C. 199A(g)(6).

Section 1.199A-9 also issued under 26 U.S.C. 199A(g)(6).

Section 1.199A-10 also issued under 26 U.S.C. 199A(g)(6).

Section 1.199A-11 also issued under 26 U.S.C. 199A(g)(6).

Section 1.199A-12 also issued under 26 U.S.C. 199A(g)(6).

Section 1.216-2 also issued under 26 U.S.C. 216(d).

Section 1.221-2 also issued under 26 U.S.C. 221(d).

Section 1.245A-5 also issued under 26 U.S.C. 245A(g), 951A(a), 954(c)(6)(A), and 965(o).

Sections 1.245A-6 through 1.245A-11 also issued under 26 U.S.C. 245A(g), 882(c)(1)(A), 951A, 954(b)(5), 954(c)(6), and 965(o).

Section 1.245A(e)-1 also issued under 26 U.S.C. 245A(g).

Section 1.250-0 also issued under 26 U.S.C. 250(c).

Section 1.250-1 also issued under 26 U.S.C. 250(c).

Section 1.250(a)-1 also issued under 26 U.S.C. 250(c) and 6001.

Section 1.250(b)-1 also issued under 26 U.S.C. 250(c) and 6001.

Section 1.250(b)-2 also issued under 26 U.S.C. 250(c).

Section 1.250(b)-3 also issued under 26 U.S.C. 250(c).

Section 1.250(b)-4 also issued under 26 U.S.C. 250(c).

Section 1.250(b)-5 also issued under 26 U.S.C. 250(c).

Section 1.250(b)-6 also issued under 26 U.S.C. 250(c).

Section 1.263A-1 also issued under 26 U.S.C. 263A(j).

Section 1.263A-2 also issued under 26 U.S.C. 263A(j).

Section 1.263A-3 also issued under 26 U.S.C. 263A(j).

Section 1.263A-4 also issued under 26 U.S.C. 263A.

Section 1.263A-4T also issued under 26 U.S.C. 263A.

Section 1.263A-5 also issued under 26 U.S.C. 263A.

Section 1.263A-6 also issued under 26 U.S.C. 263A.

Section 1.263A-7 also issued under 26 U.S.C. 263A(j).

Section 1.263A-7T also issued under 26 U.S.C. 263A.

Sections 1.263A-8 through 1.263A-15 also issued under 26 U.S.C. 263A(j).

Sections 1.267A-1 through 1.267A-7 also issued under 26 U.S.C. 267A(e).

Section 1.267(a)-3 also issued under 26 U.S.C. 267(a)(3)(A) and (a)(3)(B)(ii).

Section 1.267(f)-1 also issued under 26 U.S.C. 267 and 1502.

Section 1.269-3(d) also issued under 26 U.S.C. 382(m).

Section 1.274-2 also issued under 26 U.S.C. 274(o).

Section 1.274-5 also issued under 26 U.S.C. 274(d).

Section 1.274-5T also issued under 26 U.S.C. 274(d).

Section 1.274-9 also issued under 26 U.S.C. 274(o).

Section 1.274-10 also issued under 26 U.S.C. 274(o).

Section 1.274-11 also issued under 26 U.S.C. 274.

Section 1.274-12 also issued under 26 U.S.C. 274.

Section 1.274-13 also issued under 26 U.S.C. 274.

Section 1.274-14 also issued under 26 U.S.C. 274.

Section 1.274(d)-1 also issued under 26 U.S.C. 274(d).

Section 1.274(d)-1T also issued under 26 U.S.C. 274(d).

Section 1.280C-4 also issued under 26 U.S.C. 280C(c)(4).

Section 1.280F-1T also issued under 26 U.S.C. 280F.

Section 1.280F-6 also issued under 26 U.S.C. 280F.

Section 1.280F-7 also issued under 26 U.S.C. 280F(c).

Section 1.280G-1 also issued under 26 U.S.C. 280G(b) and (e).

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.301-1 also issued under 26 U.S.C. 357(d)(3).

Section 1.301-1T also issued under 26 U.S.C. 357(d)(3).

Section 1.304-5 also issued under 26 U.S.C. 304.

Section 1.304-7 also issued under 26 U.S.C. 304(b)(5)(C).

Section 1.305-3 also issued under 26 U.S.C. 305.

Section 1.305-5 also issued under 26 U.S.C. 305.

Section 1.305-7 also issued under 26 U.S.C. 305.

Section 1.332-8 also issued under 26 U.S.C. 332(d)(4).

Section 1.334-1 also issued under 26 U.S.C. 367(b).

Section 1.336-1 is also issued under 26 U.S.C. 336.

Section 1.336-2 is also issued under 26 U.S.C. 336.

Section 1.336-3 is also issued under 26 U.S.C. 336.

Section 1.336-4 is also issued under 26 U.S.C. 336.

Section 1.336-5 is also issued under 26 U.S.C. 336.

Section 1.337(d)-1 also issued under 26 U.S.C. 337(d).

Section 1.337(d)-2 also issued under 26 U.S.C. 337(d).

Section 1.337(d)-3 also issued under 26 U.S.C. 337(d).

Section 1.337(d)-4 also issued under 26 U.S.C. 337.

Section 1.337(d)-5 also issued under 26 U.S.C. 337.

Section 1.337(d)-6 also issued under 26 U.S.C. 337.

Section 1.337(d)-7 also issued under 26 U.S.C. 337.

Section 1.337(d)-7T also issued under 26 U.S.C. 337(d) and 355(h).

Section 1.338-1 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-2 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-3 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-4 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-5 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-6 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-7 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-8 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-9 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-10 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338-11 also issued under 26 U.S.C. 338.

Section 1.338-11T also issued under 26 U.S.C. 338.

Section 1.338(h)(10)-1 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.338(h)(10)-1T also issued under 26 U.S.C. 337(d), 338 and 1502.

Section 1.338(i)-1 also issued under 26 U.S.C. 337(d), 338, and 1502.

Section 1.351-1 also issued under 26 U.S.C. 351.

Section 1.351-2 also issued under 26 U.S.C. 351(g)(4).

Section 1.354-1 also issued under 26 U.S.C. 351(g)(4).

Section 1.355-1 also issued under 26 U.S.C. 351(g)(4).

Section 1.355-2(g) and (i) also issued under 26 U.S.C. 355(b)(3)(D).

Section 1.355-2T(g) and (i) are also issued under 26 U.S.C. 355(b)(3)(D).

Section 1.355-6 also issued under 26 U.S.C. 355(d)(9).

Section 1.355-7 also issued under 26 U.S.C. 355(e)(5).

Section 1.355-8 also issued under 26 U.S.C. 336(e), 355(e)(3)(B), 355(e)(5), and 355(f).

Section 1.356-6 also issued under 26 U.S.C. 351(g)(4).

Section 1.356-7 also issued under 26 U.S.C. 351(g)(4).

Section 1.358-2 also issued under 26 U.S.C. 358(b)(1).

Section 1.358-5 also issued under 26 U.S.C. 358(h)(2).

Section 1.358-5T also issued under 26 U.S.C. 358(h)(2).

Section 1.358-7 also issued under Public Law 106-554, 114 Stat. 2763, 2763A-638 (2001).

Section 1.362-3 also issued under 26 U.S.C. 367(b).

Section 1.362-4 also issued under 26 U.S.C. 362(e)(2)(C)(ii).

Section 1.367(a)-1 also issued under 26 U.S.C. 367(a).

Section 1.367(a)-1T also issued under 26 U.S.C. 367(a).

Section 1.367(a)-3 also issued under 26 U.S.C. 367(a).

Section 1.367(a)-3T also issued under 26 U.S.C. 367(a).

Section 1.367(a)-7 also issued under 26 U.S.C. 367(a), (b), (c), and 337(d).

Section 1.367(a)-8 also issued under 26 U.S.C. 367(a) and (b).

Section 1.367(a)-9T also issued under 26 U.S.C. 367(a) and (b).

Section 1.367(b)-0 also issued under 26 U.S.C. 367(b).

Section 1.367(b)-1 also issued under 26 U.S.C. 367(a) and (b).

Section 1.367(b)-2 also issued under 26 U.S.C. 367(a) and (b).

Sections 1.367(b)-2(c)(1) and (2) also issued under 26 U.S.C. 367(b)(1) and (2).

Section 1.367(b)-2(d)(3) also issued under 26 U.S.C. 367(b)(1) and (2).

Section 1.367(b)-3 also issued under 26 U.S.C. 367(a) and (b).

Section 1.367(b)-3T also issued under 26 U.S.C. 367(a) and (b).

Section 1.367(b)-4 also issued under 26 U.S.C. 367(a) and (b) and 954(c)(6)(A).

Section 1.367(b)-4(b)(1) also issued under 26 U.S.C. 367(b).

Section 1.367(b)-4(d) also issued under 26 U.S.C. 367(b)(1) and (2).

Section 1.367(b)-6 also issued under 26 U.S.C. 367(b).

Section 1.367(b)-7 also issued under 26 U.S.C. 367(a) and (b), 26 U.S.C. 902, and 26 U.S.C. 904.

Section 1.367(b)-8 also issued under 26 U.S.C. 367(b).

Section 1.367(b)-9 also issued under 26 U.S.C. 367(a) and (b), 26 U.S.C. 902, and 26 U.S.C. 904.

Section 1.367(b)-10 also issued under 26 U.S.C. 367(b).

Section 1.367(b)-12 also issued under 26 U.S.C. 367(a) and (b).

Section 1.367(b)-13 also issued under 26 U.S.C. 367(b).

Section 1.367(d)-1 also issued under 26 U.S.C. 367(d).

Section 1.367(e)-1 also issued under 26 U.S.C. 367(e)(1).

Section 1.367(e)-1(a) also issued under 26 U.S.C. 367(e).

Section 1.367(e)-2 also issued under 26 U.S.C. 367(e)(2).

Section 1.382-1 also issued under 26 U.S.C. 382(m).

Section 1.382-2 also issued under 26 U.S.C. 382(k)(1), (l)(3), (m), and 26 U.S.C. 383.

Section 1.382-2T also issued under 26 U.S.C. 382(g)(4)(C), (i), (k)(1) and (6), (l)(3), (m), and 26 U.S.C. 383.

Section 1.382-3 also issued under 26 U.S.C. 382(g)(4)(C) and 26 U.S.C. 382(m).

Section 1.382-4 also issued under 26 U.S.C. 382(l)(3) and 382(m).

Section 1.382-5 also issued under 26 U.S.C. 382(m).

Section 1.382-5T also issued under 26 U.S.C. 382(m).

Section 1.382-6 also issued under 26 U.S.C. 382(b)(3)(A), 26 U.S.C.(d)(1), 26 U.S.C. 382(m), and 26 U.S.C.383(d).

Section 1.382-7 also issued under 26 U.S.C 382(m).

Section 1.382-7T also issued under 26 U.S.C. 382(m).

Section 1.382-8 also issued under 26 U.S.C. 382(m).

Section 1.382-9 also issued under 26 U.S.C. 382(l)(3) and (m).

Section 1.382-10 also issued under 26 U.S.C 382(m).

Section 1.382-10T is also issued under 26 U.S.C. 382(m).

Section 1.382-12 also issued under 26 U.S.C. 382(f) and 26 U.S.C. 382(m).

Section 1.383-0 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 383.

Section 1.383-1 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 383.

Section 1.383-2 also issued under 26 U.S.C. 383.

Section 1.385-1 also issued under 26 U.S.C. 385.

Section 1.385-3 also issued under 26 U.S.C. 385, 701, 1502, 1504(a)(5)(A), and 7701(l).

Section 1.385-4 also issued under 26 U.S.C. 385 and 1502.

Authority:

26 U.S.C. 401(m)(9) and 26 U.S.C. 7805.

Section 1.401-12 also issued under 26 U.S.C. 401(d)(1).

Section 1.401(a)-1 also issued under 26 U.S.C. 401

Section 1.401(a)(2)-1 also issued under Multiemployer Pension Plan Amendments Act, Public Law 96-364, 410, (94 Stat. 1208, 1308)(1980).

Section 1.401(a)(5)-1 also issued under 26 U.S.C. 401(a)(5).

Section 1.401(a)(9)-1 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(9)-2 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(9)-3 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(9)-4 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(9)-5 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(9)-6 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(9)-7 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(9)-8 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(9)-9 also issued under 26 U.S.C. 401(a)(9).

Section 1.401(a)(17)-1 also issued under 26 U.S.C. 401(a)(17).

Sections 1.401(a)(26)-1 through (a)(26)-9 also issued under 26 U.S.C. 401(a)(26).

Section 1.401(a)(35)-1 is also issued under 26 U.S.C. 401(a)(35).

Section 1.401(a)-21 also issued under 26 U.S.C. 401 and section 104 of the Electronic Signatures in Global and National Commerce Act, Public Law 106-229 (114 Stat. 464).

Section 1.401(b)-1 also issued under 26 U.S.C. 401(b).

Section 1.401(k)-3 is also issued under 26 U.S.C. 401(m)(9).

Section 1.401(l)-0 through 1.401(l)-6 also issued under 26 U.S.C. 401(l).

Section 1.402A-1 is also issued under 26 U.S.C. 402A

Section 1.403(b)-6 also issued under 26 U.S.C. 403(b)(10).

Section 1.408-2 also issued under 26 U.S.C. 408(a) and 26 U.S.C. 408(q).

Section 1.404(k)-3 is also issued under sections 26 U.S.C. 162(k) and 404(k)(5)(A).

Section 1.408-4 also issued under 26 U.S.C. 408.

Section 1.408-8 also issued under 26 U.S.C. 408(a)(6) and (b)(3).

Section 1.408-11 also issued under 26 U.S.C. 408.

Section 1.408(q)-1 also issued under 26 U.S.C. 408(q).

Section 1.408A-1 also issued under 26 U.S.C. 408A.

Section 1.408A-2 also issued under 26 U.S.C. 408A.

Section 1.408A-3 also issued under 26 U.S.C. 408A.

Section 1.408A-4 also issued under 26 U.S.C. 408A.

Section 1.408A-5 also issued under 26 U.S.C. 408A.

Section 1.408A-6 also issued under 26 U.S.C. 408A.

Section 1.408A-7 also issued under 26 U.S.C. 408A.

Section 1.408A-8 also issued under 26 U.S.C. 408A.

Section 1.408A-9 also issued under 26 U.S.C. 408A.

Section 1.409(p)-1 is also issued under 26 U.S.C. 409(p)(7).

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.410(b)-2 also issued under 26 U.S.C. 410(b)(6).

Section 1.410(b)-3 also issued under 26 U.S.C. 410(b)(6).

Section 1.410(b)-4 also issued under 26 U.S.C. 410(b)(6).

Section 1.410(b)-5 also issued under 26 U.S.C. 410(b)(6).

Section 1.410(b)-6 also issued under 26 U.S.C. 410(b)(6) and section 664 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (Public Law 107-16, 115 Stat. 38).

Section 1.410(b)-7 also issued under 26 U.S.C. 410(b)(6).

Section 1.410(b)-8 also issued under 26 U.S.C. 410(b)(6).

Section 1.410(b)-9 also issued under 26 U.S.C. 410(b)(6).

Section 1.410(b)-10 also issued under 26 U.S.C. 410(b)(6).

Section 1.411(a)-7 also issued under 26 U.S.C. 411(a)(7)(B)(i).

Section 1.411(a)(13)-1 also issued under 26 U.S.C. 411(a)(13).

Section 1.411(b)(5)-1 also issued under 26 U.S.C. 411(b)(5).

Section 1.411(d)-3 also issued under 26 U.S.C. 411(d)(6) and section 645(b) of the Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16 (115 Stat. 38).

Section 1.411(d)-4 also issued under 26 U.S.C. 411(d)(6).

Section 1.411(d)-6 issued under Reorganization Plan No. 4 of 1978, 29 U.S.C. 1001nt.

§§ 1.414(c)-1 through 1.414(c)-5 also issued under 26 U.S.C. 414(c).

Section 1.414(c)-5 also issued under 26 U.S.C. 414(b), (c), and (o).

Section 1.414(q)-1T also issued under 26 U.S.C. 414(q).

Sections 1.414(r)-0 through 1.414(r)-7 also issued under 26 U.S.C. 414(r).

Section 1.414(r)-8 also issued under 26 U.S.C. 410(b) and 414(r).

Section 1.414(r)-9 also issued under 26 U.S.C. 401(a)(26) and 414(r).

Section 1.414(r)-10 also issued under 26 U.S.C. 129 and 414(r).

Section 1.414(r)-1 also issued under 26 U.S.C. 414(r).

Section 1.414(s)-1 also issued under 26 U.S.C. 414(s).

Section 1.417(e)-1 also issued under 26 U.S.C. 417(e)(3)(A)(ii)(II).

Section 1.417(e)-1T also issued under 26 U.S.C. 417(e)(3)(A)(ii)(II).

Section 1.419A(f)(6)-1 also issued under 26 U.S.C. 419A(i).

Section 1.420-1 also issued under 26 U.S.C. 420(c)(3)(E).

Section 1.430(j) 1 also issued under 26 U.S.C. 430(j)(4)(F).

Authority:

26 U.S.C. 7805.

Section 1.441-2T also issued under 26 U.S.C. 441(f).

Section 1.441-3T also issued under 26 U.S.C. 441.

Section 1.442-2T and 1.442-3T also issued under 26 U.S.C. 422, 706, and 1378.

Section 1.444-0T through 1.444-3T and

Section 1.444-4 is also issued under 26 U.S.C. 444(g).

Section 1.446-1 also issued under 26 U.S.C. 446 and 461(h).

Section 1.446-4 also issued under 26 U.S.C. 1502.

Section 1.446-6 also issued under 26 U.S.C. 446 and 26 U.S.C. 860G.

Section 1.446-7 also issued under 26 U.S.C. 446.

Section 1.451-3 also issued under 26 U.S.C. 451(b)(1)(A)(ii), (b)(3)(C) and 461(h).

Section 1.451-8 also issued under 26 U.S.C. 451(c)(2)(A), (3), (4)(A)(iii), (4)(b)(vii), and 461(h).

Section 1.453-11 also issued under 26 U.S.C. 453(j)(1) and (k).

Section 1.453A-3 also issued under 26 U.S.C. 453A.

Section 1.458-1 also issued under 26 U.S.C. 458.

Section 1.460-1 also issued under 26 U.S.C. 460(h).

Section 1.460-2 also issued under 26 U.S.C. 460(h).

Section 1.460-3 also issued under 26 U.S.C. 460(h).

Section 1.460-4 also issued under 26 U.S.C. 460(h) and 1502.

Section 1.460-5 also issued under 26 U.S.C. 460(h).

Section 1.460-6 also issued under 26 U.S.C. 460(h).

Section 1.461-1 also issued under 26 U.S.C. 461(h).

Section 1.461-2 also issued under 26 U.S.C. 461(h).

Section 1.461-4 also issued under 26 U.S.C. 461(h).

Section 1.461-4(d) also issued under 26 U.S.C. 460 and 26 U.S.C. 461(h).

Section 1.461-5 also issued under 26 U.S.C. 461(h).

Section 1.461-6 also issued under 26 U.S.C. 461(h).

Section 1.465-8 also issued under 26 U.S.C. 465.

Section 1.465-20 also issued under 26 U.S.C. 465.

Section 1.465-27 also issued under 26 U.S.C. 465(b)(6)(B)(iii).

Section 1.466-1 through 1.466-4 also issued under 26 U.S.C. 466.

Section 1.467-1 is also issued under 26 U.S.C. 467.

Section 1.467-2 is also issued under 26 U.S.C. 467.

Section 1.467-3 is also issued under 26 U.S.C. 467.

Section 1.467-4 is also issued under 26 U.S.C. 467.

Section 1.467-5 is also issued under 26 U.S.C. 467.

Section 1.467-6 is also issued under 26 U.S.C. 467.

Section 1.467-7 is also issued under 26 U.S.C. 467.

Section 1.467-8 is also issued under 26 U.S.C. 467.

Section 1.467-9 is also issued under 26 U.S.C. 467.

Section 1.468A-5 also issued under 26 U.S.C. 468A(e)(5).

Section 1.468A-5T also issued under 26 U.S.C. 468A(e)(5).

Section 1.468B-1 also issued under 26 U.S.C. 461(h) and 468B(g).

Section 1.468B-2 also issued under 26 U.S.C. 461(h) and 468B(g).

Section 1.468B-3 also issued under 26 U.S.C. 461(h) and 468B(g).

Section 1.468B-4 also issued under 26 U.S.C. 461(h) and 468B(g).

Section 1.468B-5 also issued under 26 U.S.C. 461(h) and 468B(g).

Section 1.468B-7 also issued under 26 U.S.C. 461(h) and 468B(g).

Section 1.468B-9 also issued under 26 U.S.C. 461(h) and 468B(g).

Section 1.469-1 also issued under 26 U.S.C. 469.

Section 1.469-1T also issued under 26 U.S.C. 469.

Section 1.469-2 also issued under 26 U.S.C. 469(l).

Section 1.469-2T also issued under 26 U.S.C. 469(l).

Section 1.469-3 also issued under 26 U.S.C. 469(l).

Section 1.469-3T also issued under 26 U.S.C. 469(l).

Section 1.469-4 also issued under 26 U.S.C. 469(l).

Section 1.469-5 also issued under 26 U.S.C. 469(l).

Section 1.469-5T also issued under 26 U.S.C. 469(l).

Section 1.469-7 also issued under 26 U.S.C. 469(l).

Section 1.469-9 also issued under 26 U.S.C. 469(c)(6), (h)(2), and (l)(1).

Section 1.469-11 also issued under 26 U.S.C. 469(l).

Section 1.471 also issued under 26 U.S.C. 471.

Section 1.471-3 also issued under 26 U.S.C. 471(a).

Section 1.471-4 also issued under 26 U.S.C. 263A.

Section 1.471-5 also issued under 26 U.S.C. 263A.

Section 1.471-6 also issued under 26 U.S.C. 471.

Section 1.472-8 also issued under 26 U.S.C. 472.

Section 1.475(a)-3 also issued under 26 U.S.C. 475(e).

Section 1.475(a)-4 also issued under 26 U.S.C. 475(g).

Section 1.475(b)-1 also issued under 26 U.S.C. 475(b)(4) and 26 U.S.C. 475(e).

Section 1.475(b)-2 also issued under 26 U.S.C. 475(b)(2) and 26 U.S.C. 475(e).

Section 1.475(b)-4 also issued under 26 U.S.C. 475(b)(2), 26 U.S.C. 475(e), and 26 U.S.C. 6001.

Section 1.475(c)-1 also issued under 26 U.S.C. 475(e).

Section 1.475(c)-2 also issued under 26 U.S.C. 475(e) and 26 U.S.C. 860G(e).

Section 1.475(d)-1 also issued under 26 U.S.C. 475(e).

Section 1.475(e)-1 also issued under 26 U.S.C. 475(e).

Section 1.481-1 also issued under 26 U.S.C. 481.

Section 1.481-2 also issued under 26 U.S.C. 481.

Section 1.481-3 also issued under 26 U.S.C. 481.

Section 1.481-4 also issued under 26 U.S.C. 481.

Section 1.481-5 also issued under 26 U.S.C. 481.

Section 1.481-6 is also issued under 26 U.S.C. 481.

Section 1.482-1 also issued under 26 U.S.C. 482 and 936.

Sections 1.482-1 and 1.482-1T also issued under 26 U.S.C. 482.

Section 1.482-2 also issued under 26 U.S.C. 482.

Section 1.482-3 also issued under 26 U.S.C. 482.

Section 1.482-4 also issued under 26 U.S.C. 482.

Section 1.482-5 also issued under 26 U.S.C. 482.

Section 1.482-7 is also issued under 26 U.S.C. 482.

Section 1.482-9 also issued under 26 U.S.C. 482.

Section 1.482-2A also issued under 26 U.S.C. 482.

Section 1.482-7A also issued under 26 U.S.C. 482.

Section 1.482-9 also issued under 26 U.S.C. 482.

Section 1.483-1 through 1.483-3 also issued under 26 U.S.C. 483(f).

Section 1.483-4 also issued under 26 U.S.C. 483(f).

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.501(c)(29)-1 also issued under 26 U.S.C. 501(c)(29)(B)(i).

Section 1.501(c)(29)-1T also issued under 26 U.S.C. 501(c)(29)(B)(i).

Sections 1.504-1 and 1.504-2 also issued under 26 U.S.C. 504(b).

Section 1.514(c)-2 also issued under 26 U.S.C. 514(c)(9)(E)(iii).

Section 1.527-9 also issued under 26 U.S.C. 527(h)(2)(B)(i).

Sections 1.529A-0 through 1.529A-8 also issued under 26 U.S.C. 529A(g).

Section1.585-5 through 1.585-8 also issued under 26 U.S.C. 585(b)(3).

Section1.597-1 through 1.597-7 also issued under 26 U.S.C. 597 and 1502.

Section1.597-8 also issued under 26 U.S.C. 597.

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.642(c)-6 also issued under 26 U.S.C. 642(c)(5).

Section 1.642(h)-2 also issued under 26 U.S.C. 642(h).

Section 1.642(h)-5 also issued under 26 U.S.C. 642(h).

Section 1.643(a)-8 also issued under 26 U.S.C. 643(a)(7).

Section 1.643(f)-1 also issued under 26 U.S.C. 643(f).

Section 1.643(h)-1 also issued under 26 U.S.C. 643(a)(7).

Section 1.642(c)-6A also issued under 26 U.S.C. 642(c)(5).

Section 1.645-1 also issued under 26 U.S.C. 645.

Sections 1.663(c)-1, 1.663(c)-2, 1.663(c)-3, 1.663(c)-4, 1.663(c)-5, and 1.663(c)-6 also issued under 26 U.S.C. 663(c).

Section 1.664-1 also issued under 26 U.S.C. 664(a).

Section 1.664-2 also issued under 26 U.S.C. 664(a).

Section 1.664-3 also issued under 26 U.S.C. 664(a).

Section 1.664-4 also issued under 26 U.S.C. 664(a).

Section 1.664-4A also issued under 26 U.S.C. 664(a).

Section 1.671-2 also issued under 26 U.S.C. 643(a)(7) and 672(f)(6).

Section 1.672(f)-1 also issued under 26 U.S.C. 643(a)(7) and 672(f)(6).

Section 1.672(f)-2 also issued under 26 U.S.C. 643(a)(7) and 672(f)(3) and (6).

Section 1.672(f)-3 also issued under 26 U.S.C. 643(a)(7) and 672(f)(2) and (6).

Section 1.672(f)-4 also issued under 26 U.S.C. 643(a)(7) and 672(f)(4) and (6).

Section 1.672(f)-5 also issued under 26 U.S.C. 643(a)(7) and 672(f)(6).

Section 1.679-1 also issued under 26 U.S.C. 643(a)(7) and 679(d).

Section 1.679-2 also issued under 26 U.S.C. 643(a)(7) and 679(d).

Section 1.679-3 also issued under 26 U.S.C. 643(a)(7) and 679(d).

Section 1.679-4 also issued under 26 U.S.C. 643(a)(7), 679(a)(3) and 679(d).

Section 1.679-5 also issued under 26 U.S.C. 643(a)(7) and 679(d).

Section 1.679-6 also issued under 26 U.S.C. 643(a)(7) and 679(d).

Section 1.684-1 also issued under 26 U.S.C. 643(a)(7) and 684(a).

Section 1.684-2 also issued under 26 U.S.C. 643(a)(7) and 684(a).

Section 1.684-3 also issued under 26 U.S.C. 643(a)(7) and 684(a).

Section 1.684-4 also issued under 26 U.S.C. 643(a)(7) and 684(a).

Section 1.684-5 also issued under 26 U.S.C. 643(a)(7) and 684(a).

Section 1.701-2 also issued under 26 U.S.C. 701 through 761.

Section 1.704-3 also issued under 26 U.S.C. 704(c).

Section 1.704-4 also issued under 26 U.S.C. 704(c).

Section 1.705-2 also issued under 26 U.S.C. 705 and 1032.

Section 1.706-1T also issued under 26 U.S.C. 706(b).

Section 1.706-3T also issued under 26 U.S.C. 444(f).

Section 1.706-4 also issued under 26 U.S.C. 706(d).

Sections 1.707-2 through 1.707-9 also issued under 26 U.S.C. 707(a)(2).

Section 1.721-1 also issued under 26 U.S.C. 721.

Section 1.721(c)-1 also issued under 26 U.S.C. 721(c).

Section 1.721(c)-2 also issued under 26 U.S.C. 721(c).

Section 1.721(c)-3 also issued under 26 U.S.C. 721(c).

Section 1.721(c)-4 also issued under 26 U.S.C. 721(c).

Section 1.721(c)-5 also issued under 26 U.S.C. 721(c).

Section 1.721(c)-6 also issued under 26 U.S.C. 721(c).

Section 1.721(c)-7 also issued under 26 U.S.C. 721(c).

Section 1.731-2 also issued under 26 U.S.C. 731(c).

Section 1.732-1 also issued under 26 U.S.C. 732.

Section 1.732-2 also issued under 26 U.S.C. 732.

Section 1.732-3 also issued under 26 U.S.C. 337(d), 732(f)(8), and 1502.

Section 1.734-1 also issued under 26 U.S.C. 734.

Section 1.743-1 also issued under 26 U.S.C. 743.

Section 1.751-1 also issued under 26 U.S.C. 751.

Section 1.752-1(a) also issued under Public Law 106-554, 114 Stat. 2763, 2763A-638 (2001).

Section 1.752-6 also issued under Public Law 106-554, 114 Stat. 2763, 2763A-638 (2001).

Section 1.752-7 also issued under Public Law 106-554, 114 Stat. 2763, 2763A-638 (2001).

Section 1.755-1 also issued under 26 U.S.C. 755.

Section 1.755-2 also issued under 26 U.S.C. 755 and 26 U.S.C. 1060.

Section 1.761-2 also issued under 26 U.S.C. 446(b) and 26 U.S.C. 761(a).

Section 1.807-2 also issued under 26 U.S.C. 817A(e).

Section 1.807-3 also issued under 26 U.S.C. 807(e)(6).

Section 1.809-10 also issued under 26 U.S.C. 809(b)(2) and (g)(3).

Section 1.811-3 also issued under 26 U.S.C. 817A(e).

Section 1.812-9 also issued under 26 U.S.C. 817A(e).

Section 1.817-5 also issued under 26 U.S.C. 817(h).

Section 1.817A-1 also issued under 26 U.S.C. 817A(e).

Section 1.832-4 also issued under 26 U.S.C. 832(b)(5)(A).

Section 1.846-1 also issued under 26 U.S.C. 846.

Section 1.848-2 also issued under 26 U.S.C. 845(b) and 26 U.S.C. 848(d)(4)(B).

Section 1.848-3 also issued under 26 U.S.C. 848(d)(4)(B).

Authority:

26 U.S.C. 7805.

Sections 1.851-3 and 1.851-5 are also issued under 26 U.S.C. 851(c).

Section 1.852-11 is also issued under 26 U.S.C. 852(b)(3)(C), 852(b)(8), and 852(c).

Section 1.853-1 also issued under 26 U.S.C. 901(j).

Section 1.853-2 also issued under 26 U.S.C. 901(j).

Section 1.853-3 also issued under 26 U.S.C. 901(j).

Section 1.853-4 also issued under 26 U.S.C. 901(j) and 26 U.S.C. 6011.

Section 1.860A-0 also issued under 26 U.S.C. 860G(e).

Section 1.860A-1 also issued under 26 U.S.C. 860G(b) and 860G(e).

Section 1.860C-2 also issued under 26 U.S.C. 860C(b)(1) and 860G(e).

Section 1.860D-1 also issued under 26 U.S.C. 860G(e).

Section 1.860E-1 also issued under 26 U.S.C. 860E and 860G(e).

Section 1.860E-2 also issued under 26 U.S.C. 860E(e).

Section 1.860F-2 also issued under 26 U.S.C. 860G(e).

Section 1.860F-4 also issued under 26 U.S.C. 860G(e) and 26 U.S.C. 6230(k).

Section 1.860F-4T also issued under 26 U.S.C. 860G(c)(3) and (e).

Section 1.860G-1 also issued under 26 U.S.C. 860G(a)(1)(B) and (e).

Section 1.860G-2 also issued under 26 U.S.C. 860G(e).

Section 1.860G-3 also issued under 26 U.S.C. 860G(b) and 26 U.S.C. 860G(e).

Section 1.861-2 also issued under 26 U.S.C. 863(a).

Section 1.861-3 also issued under 26 U.S.C. 863(a).

Section 1.861-8 also issued under 26 U.S.C. 250(c), 26 U.S.C. 864(e)(7), and 26 U.S.C. 882(c).

Sections 1.861-9 and 1.861-9T also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e)(7), 26 U.S.C. 865(i), and 26 U.S.C. 7701(f).

Section 1.861-10(e) also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e)(7), 26 U.S.C. 865(i), and 26 U.S.C. 7701(f).

Section 1.861-11 also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e)(7), 26 U.S.C. 865(i), and 26 U.S.C. 7701(f).

Section 1.861-12 also issued under 26 U.S.C. 864(e)(7).

Section 1.861-13 also issued under 26 U.S.C. 864(e)(7).

Section 1.861-14 also issued under 26 U.S.C. 864(e)(7).

Section 1.861-17 also issued under 26 U.S.C. 864(e)(7).

Sections 1.861-8T through 1.861-14T also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e), 26 U.S.C. 865(i) and 26 U.S.C. 7701(f).

Section 1.863-1 also issued under 26 U.S.C. 863(a).

Section 1.863-2 also issued under 26 U.S.C. 863.

Section 1.863-3 also issued under 26 U.S.C. 863(a) and (b), and 26 U.S.C. 936(h).

Section 1.863-4 also issued under 26 U.S.C. 863.

Section 1.863-6 also issued under 26 U.S.C. 863.

Section 1.863-7 also issued under 26 U.S.C. 863(a) and 871(m).

Section 1.863-8 also issued under 26 U.S.C. 863(a), (b) and (d).

Section 1.863-9 also issued under 26 U.S.C. 863(a), (d) and (e).

Section 1.864-5 also issued under 26 U.S.C. 7701(l).

Section 1.864-8T also issued under 26 U.S.C. 864(d)(8).

Section 1.864(c)(8)-1 also issued under 26 U.S.C. 864(c)(8) and 897(g).

Section 1.864(c)(8)-2 also issued under 26 U.S.C. 864(c)(8)(E), 6001 and 6031(b).

Section 1.865-1 also issued under 26 U.S.C. 863(a) and 865(j)(1).

Section 1.865-2 also issued under 26 U.S.C. 863(a) and 865(j)(1).

Section 1.865-3 also issued under 26 U.S.C. 865(j).

Section 1.871-1 also issued under 26 U.S.C. 7701(l).

Section 1.871-7 also issued under 26 U.S.C. 7701(l).

Section 1.871-9 also issued under 26 U.S.C. 7701(b)(11).

Sections 1.871-15 and 1.871-15T also issued under 26 U.S.C. 871(m).

Section 1.874-1 also issued under 26 U.S.C. 874.

Section 1.881-2 also issued under 26 U.S.C. 7701(l).

Section 1.881-3 also issued under 26 U.S.C. 7701(l).

Section 1.881-4 also issued under 26 U.S.C. 7701(l).

Section 1.882-4 also issued under 26 U.S.C. 882(c).

Section 1.882-5 also issued under 26 U.S.C. 882, 26 U.S.C. 864(e), 26 U.S.C. 988(d), and 26 U.S.C. 7701(l).

Section 1.883-1 is also issued under 26 U.S.C. 883.

Section 1.883-2 is also issued under 26 U.S.C. 883.

Section 1.883-3 is also issued under 26 U.S.C. 883.

Section 1.883-4 is also issued under 26 U.S.C. 883.

Section 1.883-5 is also issued under 26 U.S.C. 883.

Section 1.884-0 also issued under 26 U.S.C. 884 (g).

Section 1.884-1 also issued under 26 U.S.C. 884.

Section 1.884-1 also issued under 26 U.S.C. 884 (g).

Section 1.884-1 (d) also issued under 26 U.S.C. 884 (c) (2) (A).

Section 1.884-1 (d) (13) (i) also issued under 26 U.S.C. 884 (c) (2).

Section 1.884-1 (e) also issued under 26 U.S.C. 884 (c) (2) (B).

Section 1.884-2 also issued under 26 U.S.C. 884(g).

Section 1.884-2T also issued under 26 U.S.C. 884 (g).

Section 1.884-4 also issued under 26 U.S.C. 884 (g).

Section 1.884-5 also issued under 26 U.S.C. 884 (g).

Section 1.884-5 (e) and (f) also issued under 26 U.S.C. 884 (e) (4) (C).

Section 1.892-1T also issued under 26 U.S.C. 892(c).

Section 1.892-2T also issued under 26 U.S.C. 892(c).

Section 1.892-3T also issued under 26 U.S.C. 892(c).

Section 1.892-4T also issued under 26 U.S.C. 892(c).

Section 1.892-5 also issued under 26 U.S.C. 892(c).

Section 1.892-5T also issued under 26 U.S.C. 892(c).

Section 1.892-6T also issued under 26 U.S.C. 892(c).

Section 1.892-7T also issued under 26 U.S.C. 892(c).

Section 1.894-1 also issued under 26 U.S.C. 894 and 7701(l).

Sections 1.897-5T, 1.897-6T and 1.897-7T also issued under 26 U.S.C. 897 (d), (e), (g) and (j) and 26 U.S.C. 367(e)(2).

Section 1.897-7 also issued under 26 U.S.C. 897(g).

Section 1.901(j)-1 also issued under 26 U.S.C. 901(j)(4).

Sections 1.901(m)-1 through 1.901-8 also issued under 26 U.S.C. 901(m)(7).

Section 1.901(m)-5 also issued under 26 U.S.C. 901(m)(3)(B)(ii).

Sections 1.902-1 and 902-2 also issued under 26 U.S.C. 902(c)(7).

Section 1.904-1 also issued under 26 U.S.C. 904(d)(7).

Section 1.904-2 also issued under 26 U.S.C. 904(d)(7).

Section 1.904-3 also issued under 26 U.S.C. 904(d)(7).

Section 1.904-4 also issued under 26 U.S.C. 250(c), 26 U.S.C. 865(j), 26. U.S.C. 904(d)(2)(J)(i), 26 U.S.C. 904(d)(6)(C), 26 U.S.C. 904(d)(7), and 26 U.S.C. 951A(f)(1)(B).

Section 1.904-5 also issued under 26 U.S.C. 904(d)(7) and 26 U.S.C. 951A(f)(1)(B).

Section 1.904-6 also issued under 26 U.S.C. 904(d)(7).

Section 1.904-7 also issued under 26 U.S.C. 904(d)(6).

Section 1.904(b)-1 also issued under 26 U.S.C. 1(h)(11)(C)(iv) and 904(b)(2)(C).

Section 1.904(b)-2 also issued under 26 U.S.C. 1(h)(11)(C)(iv) and 904(b)(2)(C).

Section 1.904(f)-(2) also issued under 26 U.S.C. 904 (f)(3)(b).

Section 1.904(g)-3 also issued under 26 U.S.C. 904(g)(4).

Section 1.904(g)-3T also issued under 26 U.S.C. 904(g)(4).

Section 1.904(i)-1 also issued under 26 U.S.C. 904(i).

Section 1.905-3 also issued under 26 U.S.C. 989(c)(4).

Sections 1.905-3T and 1.905-4T also issued under 26 U.S.C. 989(c)(4).

Section 1.905-4 also issued under 26 U.S.C. 989(c)(4), 26 U.S.C. 6227(d), 26 U.S.C. 6241(11), and 26 U.S.C. 6689(a).

Section 1.907(b)-1 is also issued under 26 U.S.C. 907(b).

Section 1.907(b)-1T also issued under 26 U.S.C. 907(b).

Authority:

26 U.S.C. 7805.

Sections 1.909-1 through 1.906-6 also issued under 26 U.S.C. 909(e).

Section 1.911-7 also issued under 26 U.S.C. 911(d)(9).

Section 1.931-1 also issued under 26 U.S.C. 7654(e).

Section 1.932-1 also issued under 26 U.S.C. 7654(e).

Section 1.934-1 also issued under 26 U.S.C. 934(b)(4).

Section 1.935-1 also issued under 26 U.S.C. 7654(e).

Section 1.936-4 also issued under 26 U.S.C. 936(h).

Section 1.936-5 also issued under 26 U.S.C. 936(h).

Section 1.936-6 also issued under 26 U.S.C. 863(a) and (b), and 26 U.S.C. 936(h).

Section 1.936-7 also issued under 26 U.S.C. 936(h).

Section 1.936-11 also issued under 26 U.S.C. 936(j).

Section 1.937-1 also issued under 26 U.S.C. 937(a).

Section 1.937-1T also issued under 26 U.S.C. 937(a).

Section 1.937-2 also issued under 26 U.S.C. 937(b).

Section 1.937-3 also issued under 26 U.S.C. 937(b).

Section 1.951-1 also issued under 26 U.S.C. 7701(a).

Section 1.951A-2 also issued under 26 U.S.C. 882(c)(1)(A) and 954(b)(5).

Section 1.951A-3 also issued under 26 U.S.C. 951A(d)(4).

Section 1.951A-5 also issued under 26 U.S.C. 951A(f)(1)(B).

Section 1.952-11T is also issued under 26 U.S.C. 852(b)(3)(C), 852(b)(8), and 852(c).

Section 1.953-2 also issued under 26 U.S.C. 7701(b)(11).

Section 1.954-0 also issued under 26 U.S.C. 954 (b) and (c).

Section 1.954-1 also issued under 26 U.S.C. 954 (b) and (c).

Section 1.954-2 also issued under 26 U.S.C. 954 (b) and (c).

Section 1.956-1 also issued under 26 U.S.C. 245A(g), 956(d), and 956(e).

Section 1.956-1T also issued under 26 U.S.C. 956(d) and 956(e).

Section 1.956-2 also issued under 26 U.S.C. 956(d) and 956(e).

Section 1.956-3 also issued under 26 U.S.C. 864(d)(8) and 956(e).

Section 1.956-4 also issued under 26 U.S.C. 956(d) and 956(e).

Section 1.957-1 also issued under 26 U.S.C. 957.

Section 1.957-3 also issued under 26 U.S.C. 957(c).

Section 1.960-1 also issued under 26 U.S.C. 960(f).

Section 1.960-2 also issued under 26 U.S.C. 960(f).

Section 1.960-3 also issued under 26 U.S.C. 960(f).

Section 1.960-4 also issued under 26 U.S.C. 951A(f)(1)(B) and 26 U.S.C. 960(f).

Section 1.962-1 also issued under 26 U.S.C. 965(o).

Section 1.965-1 also issued under 26 U.S.C. 965(c)(3)(B)(iii)(V), 965(d)(2), 965(o), 989(c), and 7701(a).

Section 1.965-2 also issued under 26 U.S.C. 965(b)(3)(A)(ii), 965(o), and 961(a) and (b).

Section 1.965-3 also issued under 26 U.S.C. 965(c)(3)(D) and 965(o).

Section 1.965-4 also issued under 26 U.S.C. 965(c)(3)(F) and 965(o).

Sections 1.965-5 through 1.965-6 also issued under 26 U.S.C. 965(o) and 26 U.S.C. 902(c)(8) (as in effect on December 21, 2017).

Section 1.965-7 also issued under 26 U.S.C. 965(h)(3), 965(h)(5), 965(i)(2), 965(i)(8)(B), 965(m)(2)(A), 965(n)(3), and 965(o).

Section 1.965-8 also issued under 26 U.S.C. 965(o).

Section 1.965-9 also issued under 26 U.S.C. 965(o).

Sections 1.985-0 through 1.985-5 also issued under 26 U.S.C. 985.

Section 1.986(a)-1 also issued under 26 U.S.C. 986(a)(1)(C) and 26 U.S.C. 986(a)(1)(D)(ii).

Section 1.986(c)-1 also issued under 26 U.S.C. 965(o) and 26 U.S.C. 989(c).

Sections 1.987-1 through 1.987-5 also issued under 26 U.S.C. 987.

Section 1.987-12 is issued under 26 U.S.C. 987 and 989.

Sections 1.988-0 through 1.988-5 also issued under 26 U.S.C. 988.

Sections 1.989(a)-0T and 1.989(a)-1T also issued under 26 U.S.C. 989(c).

Section 1.989(b)-1 also issued under 26 U.S.C. 989(b).

Section 1.989-1(c) also issued under 26 U.S.C. 989(c).

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.1036-1 also issued under 26 U.S.C. 351(g)(4).

Section 1.1059(e)-1 also issued under 26 U.S.C. 1059 (e)(1) and (e)(2).

Section 1.1060-1 also issued under 26 U.S.C. 1060.

Section 1.1061-0 added under 26 U.S.C. 1061(f).

Section 1.1061-1 added under 26 U.S.C. 1061(f).

Section 1.1061-2 added under 26 U.S.C. 1061(f).

Section 1.1061-3 added under 26 U.S.C. 1(h)(9) and 1061(f).

Section 1.1061-4 added under 26 U.S.C. 1061(f).

Section 1.1061-5 added under 26 U.S.C. 1061(f).

Section 1.1061-6 added under 26 U.S.C. 1061(f).

Sections 1.1092(b)-1T and 1.1092(b)-2T also issued under 26 U.S.C. 1092 (b)(1).

Section 1.1092(b)-4T also issued under 26 U.S.C. 1092(b)(2).

Section 1.1092(b)-6 also issued under 26 U.S.C. 1092(b)(1).

Section 1.1092(b)-6 also issued under 26 U.S.C. 1092(b)(2).

Section 1.1092(c)-1 also issued under 26 U.S.C. 1092(c)(4)(H).

Section 1.1092(c)-2 also issued under 26 U.S.C. 1092(c)(4)(H).

Section 1.1092(c)-3 also issued under 26 U.S.C. 1092(c)(4)(H).

Section 1.1092(c)-4 also issued under 26 U.S.C. 1092(c)(4)(H).

Section 1.1092(d)-1 also issued under 26 U.S.C. 1092(b)(1).

Section 1.1092(d)-2 also issued under 26 U.S.C. 1092(d)(3)(B).

Section 1.1202-2 is also issued under 26 U.S.C. 1202(k).

Section 1.1221-2 also issued under 26 U.S.C. 1221(b)(2)(A)(iii), (b)(2)(B), and (b)(3); 1502 and 6001.

Section 1.1244(e)-1 also issued under 26 U.S.C. 1244(e).

Section 1.1248-8 also issued under 26 U.S.C. 1248(a) and (c)(1) and (2).

Section 1.1254-1 also issued under 26 U.S.C. 1254(b).

Section 1.1254-2 also issued under 26 U.S.C. 1254(b).

Section 1.1254-3 also issued under 26 U.S.C. 1254(b).

Section 1.1254-4 also issued under 26 U.S.C. 1254(b).

Section 1.1254-5 also issued under 26 U.S.C. 1254(b).

Section 1.1254-6 also issued under 26 U.S.C. 1254(b).

Section 1.1271-1 also issued under 26 U.S.C. 1275(d).

Section 1.1272-1 also issued under 26 U.S.C. 1275(d).

Section 1.1272-2 also issued under 26 U.S.C. 1275(d).

Section 1.1272-3 also issued under 26 U.S.C. 1275(d).

Section 1.1273-1 also issued under 26 U.S.C. 1275(d).

Section 1.1273-2 also issued under 26 U.S.C. 1275(d).

Section 1.1274-1 also issued under 26 U.S.C. 1275(d).

Section 1.1274-2 also issued under 26 U.S.C. 1275(d).

Section 1.1274-3 also issued under 26 U.S.C. 1275(d).

Section 1.1274-4 also issued under 26 U.S.C. 1275(d).

Section 1.1274-5 also issued under 26 U.S.C. 1275(d).

Section 1.1274A-1 also issued under 26 U.S.C. 1274A(e) and 26 U.S.C. 1275(d).

Section 1.1275-1 also issued under 26 U.S.C. 1275(d).

Section 1.1275-2 also issued under 26 U.S.C. 1275(d).

Section 1.1275-3 also issued under 26 U.S.C. 1275(d).

Section 1.1275-4 also issued under 26 U.S.C. 1275(d).

Section 1.1275-5 also issued under 26 U.S.C. 1275(d).

Section 1.1275-6 also issued under 26 U.S.C. 1275(d).

Section 1.1275-7 also issued under 26 U.S.C. 1275(d).

Section 1.1286-1 also issued under 26 U.S.C. 1275(D) and 1286(f).

Section 1.1286-2 also issued under 26 U.S.C. 1286(f).

Section 1.1287-1 also issued under 26 U.S.C. 165 (j)(3).

Section 1.1291-1 also issued under 26 U.S.C. 1291.

Section 1.1291-1 also issued under 26 U.S.C. 1298(a) and (g).

Section 1.1291-9, also issued under 26 U.S.C. 1298(a) and (g).

Section 1.1298-1 also issued under 26 U.S.C. 1298(f).

Section 1.1291-9 also issued under 26 U.S.C. 1291(d)(2).

Section 1.1291-10 also issued under 26 U.S.C. 1291(d)(2).

Section 1.1293-1 also issued under 26 U.S.C. 1293.

Section 1.1294-1T also issued under 26 U.S.C. 1294.

Section 1.1295-1 also issued under 26 U.S.C. 1295.

Section 1.1295-3 also issued under 26 U.S.C. 1295.

Section 1.1296-1 also issued under 26 U.S.C. 1296(g) and 26 U.S.C. 1298(f).

Section 1.1296(e)-1 also issued under 26 U.S.C. 1296(e).

Section 1.1297-1 also issued under 26 U.S.C. 1298(g).

Section 1.1297-2 also issued under 26 U.S.C. 1298(g).

Section 1.1297-3T also issued under 26 U.S.C. 1297(b)(1).

Section 1.1297-4 also issued under 26 U.S.C. 1297(b)(2)(B) and 1298(g).

Section 1.1297-5 also issued under 26 U.S.C. 1297(b)(2)(B) and 1298(g).

Section 1.1297-6 also issued under 26 U.S.C. 1297(b)(2)(B) and 1298(g).

Section 1.1298-1T also issued under 26 U.S.C. 1298(f) and (g).

Section 1.1298-2 also issued under 26 U.S.C. 1298(b)(3) and (g).

Section 1.1298-4 also issued under 26 U.S.C. 1298(g).

Section 1.1301-1 also issued under 26 U.S.C. 1301(c).

Section 1.1301-1T also issued under 26 U.S.C. 1301(c).

Section 1.1361-1(j) (6), (10) and (11) also issued under 26 U.S.C. 1361(d)(2)(B)(iii).

Section 1.1361-1(l) also issued under 26 U.S.C. 1361(c)(5)(C).

Sections 1.1362-1, 1.1362-2, 1.1362-3, 1.1362-4, 1.1362-5, 1.1362-6, 1.1362-7, and 1.1363-1 also issued under 26 U.S.C. 1377.

Section 1.1363-2 also issued under 26 U.S.C. 337(d).

Section 1.1368-1(f) and (g) also issued under 26 U.S.C. 1377(c).

Section 1.1368-2(b) also issued under 26 U.S.C. 1368(c).

Section 1.1374-1 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-2 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-3 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-4 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-5 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-6 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-7 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-8 also issued under 26 U.S.C. 337(d) and 1374(e).

Section 1.1374-8 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-8T also issued under 26 U.S.C. 337(d) and 1374(e).

Section 1.1374-9 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-10 also issued under 26 U.S.C. 337(d) and 1374(e).

Section 1.1374-10 also issued under 26 U.S.C. 1374(e) and 337(d).

Section 1.1374-10T also issued under 26 U.S.C. 337(d) and 1374(e).

Section 1.1377-1 also issued under 26 U.S.C. 1377(a)(2) and (c).

Section 1.1394-1 also issued under 26 U.S.C. 1397D.

Section 1.1396-1 also issued under 26 U.S.C. 1397D.

Section 1.1397E-1 also issued under 26 U.S.C. 1397E.

Section 1.1400Z2(a)-1 also issued under 26 U.S.C. 1400Z-2(e)(4).

Section 1.1400Z2(b)-1 also issued under 26 U.S.C. 1400Z-2(e)(4).

Section 1.1400Z2(c)-1 also issued under 26 U.S.C. 1400Z-2(e)(4).

Section 1.1400Z2(d)-1 also issued under 26 U.S.C. 1400Z-2(e)(4).

Section 1.1400Z2(d)-2 also issued under 26 U.S.C. 1400Z-2(e)(4).

Section 1.1400Z2(f)-1 also issued under 26 U.S.C. 1400Z-2(e)(4).

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.1402 (e)-5T also is issued under 26 U.S.C. 1402(e)(1) and (2).

Section 1.1441-2 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6).

Section 1.1441-3 also issued under 26 U.S.C. 1441(c)(4), 26 U.S.C. 3401(a)(6) and 26 U.S.C. 7701(l).

Section 1.1441-4 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6).

Section 1.1441-5 also issued under 26 U.S.C. 1441(c)(4), 26 U.S.C. 3401(a)(6) and 26 U.S.C. 7701(b)(11).

Section 1.1441-6 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6).

Section 1.1441-7 also issued under 26 U.S.C. 1441(c)(4), 26 U.S.C. 3401(a)(6) and 26 U.S.C. 7701(l).

Section 1.1443-1 also issued under 26 U.S.C. 1443(a).

Section 1.1445-5 also issued under 26 U.S.C. 1445(e)(7).

Section 1.1445-8 also issued under 26 U.S.C. 1445(e)(7).

Section 1.1446-3 also issued under 26 U.S.C. 1446(g).

Section 1.1446-4 also issued under 26 U.S.C. 1446(g).

Section 1.1446(f)-1 also issued under 26 U.S.C. 1446(f)(6) and 1446(g).

Section 1.1446(f)-2 also issued under 26 U.S.C. 1446(f)(6) and 1446(g).

Section 1.1446(f)-3 also issued under 26 U.S.C. 1446(f)(6) and 1446(g).

Section 1.1446(f)-4 also issued under 26 U.S.C. 1446(f)(6) and 1446(g).

Section 1.1446(f)-5 also issued under 26 U.S.C. 1446(f)(6) and 1446(g).

Section 1.1461-1 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6).

Section 1.1461-2 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6).

Section 1.1462-1 also issued under 26 U.S.C. 1441(c)(4) and 26 U.S.C. 3401(a)(6).

Section 1.1471-1 is also issued under 26 U.S.C. 1471

Section 1.1471-2 is also issued under 26 U.S.C. 1471

Section 1.1471-3 is also issued under 26 U.S.C. 1471

Section 1.1471-4 is also issued under 26 U.S.C. 1471

Section 1.1471-5 is also issued under 26 U.S.C. 1471

Section 1.1471-6 is also issued under 26 U.S.C. 1471

Section 1.1472-1 is also issued under 26 U.S.C. 1472

Section 1.1473-1 is also issued under 26 U.S.C. 1473

Section 1.1474-1 is also issued under 26 U.S.C. 1474

Section 1.1474-2 is also issued under 26 U.S.C. 1474

Section 1.1474-3 is also issued under 26 U.S.C. 1474

Section 1.1474-4 is also issued under 26 U.S.C. 1474

Section 1.1474-5 is also issued under 26 U.S.C. 1474

Section 1.1474-6 is also issued under 26 U.S.C. 1474

Section 1.1474-7 is also issued under 26 U.S.C. 1474

Section 1.1502-0 also issued under 26 U.S.C. 1502.

Section 1.1502-1 also issued under 26 U.S.C. 1502.

Section 1.1502-2 also issued under 26 U.S.C. 1502.

Section 1.1502-3 also issued under 26 U.S.C. 1502.

Section 1.1502-4 also issued under 26 U.S.C. 1502.

Section 1.1502-9 also issued under 26 U.S.C. 1502.

Section 1.1502-11 also issued under 26 U.S.C. 1502.

Section 1.1502-12 also issued under 26 U.S.C. 250(c) and 1502.

Section 1.1502-13 also issued under 26 U.S.C. 250(c) and 1502.

Section 1.1502-14Z also issued under 26 U.S.C. 1400Z-2(e)(4) and 1502.

Section 1.1502-15 also issued under 26 U.S.C. 1502.

Section 1.1502-17 also issued under 26 U.S.C. 446 and 1502.

Section 1.1502-18 also issued under 26 U.S.C. 1502.

Section 1.1502-19 also issued under 26 U.S.C. 301, 1502, and 1503.

Section 1.1502-20 also issued under 26 U.S.C. 337(d) and 1502.

Section 1.1502-20T also issued under 26 U.S.C. 337(d) and 1502.

Section 1.1502-21 also issued under 26 U.S.C. 1502 and 6402(i).

Section 1.1502-21(b)(1) and (b)(3)(v) also issued under 26 U.S.C. 1502.

Section 1.1502-21T also issued under 26 U.S.C. 1502.

Section 1.1502-21T(b)(1) and (b)(3)(v) also issued under 26 U.S.C. 1502.

Section 1.1502-22 also issued under 26 U.S.C. 1502.

Section 1.1502-23 also issued under 26 U.S.C. 1502.

Section 1.1502-26 also issued under 26 U.S.C. 1502.

Section 1.1502-28 also issued under 26 U.S.C. 1502.

Section 1.1502-30 also issued under 26 U.S.C. 1502.

Section 1.1502-31 also issued under 26 U.S.C. 1502.

Section 1.1502-32 also issued under 26 U.S.C. 301, 1502, and 1503.

Section 1.1502-32 also issued under 26 U.S.C. 1502.

Section 1.1502-32(a)(2), (b)(3)(iii)(C), (b)(3)(iii)(D), and (b)(4)(vi) also issued under 26 U.S.C. 1502.

Section 1.1502-32T also issued under 26 U.S.C. 1502.

Section 1.1502-33 also issued under 26 U.S.C. 1502.

Section 1.1502-34 also issued under 26 U.S.C. 1502.

Section 1.1502-35 also issued under 26 U.S.C. 1502.

Section 1.1502-35T also issued under 26 U.S.C. 1502.

Section 1.1502-36 also issued under 26 U.S.C. 1502.

Section 1.1502-36 also issued under 26 U.S.C. 337(d).

Section 1.1502-43 also issued under 26 U.S.C. 1502.

Section 1.1502-47 also issued under 26 U.S.C. 1502, 1503(c) and 1504(c).

Section 1.1502-50 also issued under 26 U.S.C. 250(c) and 1502.

Section 1.1502-51 also issued under 26 U.S.C. 1502.

Section 1.1502-55 also issued under 26 U.S.C. 1502.

Section 1.1502-59A also issued under 26 U.S.C. 1502.

Section 1.1502-68 also issued under 26 U.S.C. 1502.

Section 1.1502-75 also issued under 26 U.S.C. 1502.

Section 1.1502-76 also issued under 26 U.S.C. 1502.

Section 1.1502-77 also issued under 26 U.S.C. 1502 and 6402(j).

Section 1.1502-78 also issued under 26 U.S.C. 1502, 6402(j), and 6411(c).

Section 1.1502-79 also issued under 26 U.S.C. 1502.

Section 1.1502-80 also issued under 26 U.S.C. 1502.

Section 1.1502-81T also issued under 26 U.S.C. 1502.

Section 1.1502-90 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-91 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-92 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-93 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-94 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-95 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-96 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-98 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-99 also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-100 also issued under 26 U.S.C. 1502.

Section 1.1503-2 also issued under 26 U.S.C. 1502.

Section 1.1503(d) also issued under 26 U.S.C. 953(d) and 26 U.S.C. 1502.

Section 1.1503-2T also issued under 26 U.S.C. 1503(d).

Section 1.1504-3 also issued under 26 U.S.C. 1400Z-2(e)(4) and 1504(a)(5).

Section 1.1504-4 also issued under 26 U.S.C. 1504(a)(5).

Section 1.1502-9A also issued under 26 U.S.C. 1502.

Section 1.1502-15A also issued under 26 U.S.C. 1502.

Section 1.1502-21A also issued under 26 U.S.C. 1502.

Section 1.1502-22A also issued under 26 U.S.C. 1502.

Section 1.1502-23A also issued under 26 U.S.C. 1502.

Section 1.1502-41A also issued under 26 U.S.C. 1502.

Section 1.1502-77A also issued under 26 U.S.C. 1502 and 6402(j).

Section 1.1502-77B also issued under 26 U.S.C. 1502 and 6402(j).

Section 1.1502-79A also issued under 26 U.S.C. 1502.

Section 1.1502-91A also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-92A also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-93A also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-94A also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-95A also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-96A also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-98A also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Section 1.1502-99A also issued under 26 U.S.C. 382(m) and 26 U.S.C. 1502.

Authority:

26 U.S.C. 7805, unless otherwise noted.

Section 1.1561-2 also issued under 26 U.S.C. 1561.

Section 1.5000A-3 also issued under 26 U.S.C. 5000A(e)(4).

Section 1.5000C-1 is also issued under 26 U.S.C. 5000C

Section 1.5000C-2 is also issued under 26 U.S.C. 5000C

Section 1.5000C-3 is also issued under 26 U.S.C. 5000C

Section 1.5000C-4 is also issued under 26 U.S.C. 5000C

Section 1.5000C-5 is also issued under 26 U.S.C. 5000C

Section 1.5000C-6 is also issued under 26 U.S.C. 5000C

Section 1.6011-4T also issued under 26 U.S.C. 6001 and 6011(a).

Section 1.6011-4T also issued under 26 U.S.C. 6011.

Section 1.6011-6 also issued under 26 U.S.C. 6011(a).

Section 1.6011-7 also issued under 26 U.S.C. 6011(e).

Section 1.6012-2 is also issued under the authority of 26 U.S.C. 6011 and 6012.

Section 1.6013-6 also issued under 26 U.S.C. 7701(b)(11).

Section 1.6015-1 also issued under 26 U.S.C. 6015(h).

Section 1.6015-2 also issued under 26 U.S.C. 6015(h).

Section 1.6015-3 also issued under 26 U.S.C. 6015(h).

Section 1.6015-4 also issued under 26 U.S.C. 6015(h).

Section 1.6015-5 also issued under 26 U.S.C. 6015(h).

Section 1.6015-6 also issued under 26 U.S.C. 6015(h).

Section 1.6015-7 also issued under 26 U.S.C. 6015(h).

Section 1.6015-8 also issued under 26 U.S.C. 6015(h).

Section 1.6015-9 also issued under 26 U.S.C. 6015(h).

Section 1.6031(a)-1 also issued under section 404 of the Tax Equity and Fiscal Responsibility Act of 1982 (Public Law 97-248; 96 Stat. 324, 669) (TEFRA).

Section 1.6033-6 also issued under 26 U.S.C. 6033(i)(1).

Section 1.6035-2 also issued under 26 U.S.C. 6035(b).

Section 1.6035-2T also issued under 26 U.S.C. 6035.

Section 1.6038-2 also issued under 26 U.S.C. 6038.

Section 1.6038-2T also issued under 26 U.S.C. 6038(d).

Section 1.6038-3 also issued under 26 U.S.C. 6038.

Section 1.6038-4 also issued under 26 U.S.C. 6001, 6011, 6012, 6031, and 6038.

Section 1.6038-5 also issued under 26 U.S.C. 6038.

Section 1.6038A-1 also issued under 26 U.S.C. 6001.

Section 1.6038A-2 also issued under 26 U.S.C. 6038A and 6038C.

Section 1.6038A-3 also issued under 26 U.S.C. 6038A and 7701(l).

Section 1.6038A-4 also issued under 26 U.S.C. 6038A.

Section 1.6038A-5 also issued under 26 U.S.C. 6038A.

Section 1.6038A-6 also issued under 26 U.S.C. 6038A.

Section 1.6038A-7 also issued under 26 U.S.C. 6038A.

Section 1.6038B-1 also issued under 26 U.S.C. 6038B.

Section 1.6038B-1T also issued under 26 U.S.C 6038B.

Section 1.6038B-2 also issued under 26 U.S.C. 6038B.

Section 1.6038B-2T also issued under 26 U.S.C. 6038B.

Section 1.6038D-0 also issued under 26 U.S.C. 6038D.

Section 1.6038D-1 also issued under 26 U.S.C. 6038D.

Section 1.6038D-2 also issued under 26 U.S.C. 6038D.

Section 1.6038D-3 also issued under 26 U.S.C. 6038D.

Section 1.6038D-4 also issued under 26 U.S.C. 6038D.

Section 1.6038D-5 also issued under 26 U.S.C. 6038D.

Section 1.6038D-6 also issued under 26 U.S.C. 6038D.

Section 1.6038D-7 also issued under 26 U.S.C. 6038D.

Section 1.6038D-8 also issued under 26 U.S.C. 6038D.

Section 1.6039I-1 also issued under 26 U.S.C. 6039I.

Section 1.6041-1 also issued under 26 U.S.C. 6041(a).

Section 1.6041-2 also issued under 26 U.S.C. 6041(d).

Section 1.6041-3 also issued under 26 U.S.C. 62 and 6041(a).

Section 1.6042-3 also issued under 26 U.S.C. 6045.

Section 1.6043-4 also issued under 26 U.S.C. 6043(c).

Section 1.6045-1 also issued under 26 U.S.C. 6045.

Section 1.6045-1T also issued under 26 U.S.C. 6045(g).

Section 1.6045-2 also issued under 26 U.S.C. 6045.

Section 1.6045-3 also issued under 26 U.S.C. 6045.

Section 1.6045-4 also issued under 26 U.S.C. 6045.

Section 1.6045A-1 also issued under 26 U.S.C. 6045A(a), (b), (c).

Section 1.6045B-1 also issued under 26 U.S.C. 6045B(a), (c), (e).

Section 1.6046-1 also issued 26 U.S.C. 6046(b).

Section 1.6046A-1 also issued under 26 U.S.C. 6046A.

Section 1.6047-2 is also issued under 26 U.S.C. 6047(d).

Section 1.6049-4 also issued under 26 U.S.C. 6049 (a), (b), and (d).

Section 1.6049-5 also issued under 26 U.S.C. 6049 (a), (b), and (d).

Section 1.6049-5T also issued under 26 U.S.C. 6049.

Section 1.6049-6 also issued under 6049(a), (b), and (d).

Section 1.6049-7 also issued under 26 U.S.C. 860G(e), 1275(c) and 26 U.S.C. 6049(d)(7)(D).

Section 1.6049-9 also issued under 26 U.S.C. 6049(a).

Section 1.6049-10 also issued under 26 U.S.C. 6049(a).

Section 1.6050E-1 also issued under 26 U.S.C. 6050E.

Section 1.6050H-1 also issued under 26 U.S.C. 6050H.

Section 1.6050H-2 also issued under 26 U.S.C. 6050H.

Section 1.6050H-3 also issued under 26 U.S.C. 6050H(h).

Section 1.6050I-1 also issued under 26 U.S.C. 6050I.

Section 1.6050I-2 also issued under 26 U.S.C. 6050I.

Section 1.6050K-1 also issued under 26 U.S.C. 6050K(a).

Section 1.6050M-1 also issued under 26 U.S.C. 6050M.

Section 1.6050P-1 also issued under 26 U.S.C. 6050P.

Section 1.6050P-2 also issued under 26 U.S.C. 6050P.

Section 1.6050S-1 also issued under 26 U.S.C. 6050S(g).

Section 1.6050S-2 also issued under 26 U.S.C. 6050S(g).

Section 1.6050S-3 also issued under 26 U.S.C. 6050S(g).

Section 1.6050S-4 also issued under 26 U.S.C. 6050S(g).

Section 1.6050X-1 also issued under 26 U.S.C. 6050X(a), (b).

Section 1.6050Y-2 also issued under 26 U.S.C. 6050Y(a).

Section 1.6050Y-3 also issued under 26 U.S.C. 6050Y(b).

Section 1.6050Y-4 also issued under 26 U.S.C. 6050Y(c).

Sections 1.6055-1 and 1.6055-2 also issued under 26 U.S.C. 6055.

Section 1.6060-1 also issued under 26 U.S.C. 6060(a).

Section 1.6061-2T also issued under 26 U.S.C. 6061.

Section 1.6065-2T also issued under 26 U.S.C. 6065.

Section 1.6081-1 also issued under 26 U.S.C. 6081.

Section 1.6081-2 also issued under 26 U.S.C. 6081.

Section 1.6081-2T also issued under 26 U.S.C. 6081.

Section 1.6081-3 also issued under 26 U.S.C. 6081.

Section 1.6081-4 also issued under 26 U.S.C. 6081.

Section 1.6081-5 also issued under 26 U.S.C. 6081.

Section 1.6081-6 also issued under 26 U.S.C. 6081.

Section 1.6081-6T also issued under 26 U.S.C. 6081.

Section 1.6081-7 also issued under 26 U.S.C. 6081.

Section 1.6081-8 also issued under 26 U.S.C. 6081(a).

Section 1.6081-9 also issued under 26 U.S.C. 6081(a).

Section 1.6081-10 also issued under 26 U.S.C. 6081.

Section 1.6081-11 also issued under 26 U.S.C. 6081.

Section 1.6109-2 also issued under 26 U.S.C. 6109(a).

Sections 1.6302-1, 1.6302-2, 1.6302-3 and 1.6302-4 also issued under 26 U.S.C. 6302(h).

Section 1.6411-4 also issued under 26 U.S.C. 6402(i) and 6411(c).

Section 1.6654-2 also issued under 26 U.S.C. 6654(n).

Section 1.6655-5 also issued under 26 U.S.C. 6655(i)(2).

Section 1.6662-6 also issued under 26 U.S.C. 6662.

Section 1.6695-1 also issued under 26 U.S.C. 6060(b) and 6695(b).

Section 1.6695-1 also issued under 26 U.S.C. 6695(b).

Section 1.6695-2 also issued under 26 U.S.C. 6695(g).

Section 1.6695-2T also issued under 26 U.S.C. 6695(g).

Section 1.6851-2 also issued under 26 U.S.C 6851(d).

Section 1.7520-1 also issued under 26 U.S.C. 7520(c)(2).

Section 1.7520-1T also issued under 26 U.S.C. 7520(c)(2).

Section 1.7520-2 also issued under 26 U.S.C. 7520(c)(2).

Section 1.7520-3 also issued under 26 U.S.C. 7520(c)(2).

Section 1.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Section 1.7701(l)-1 also issued under 26 U.S.C. 7701(l).

Section 1.7701(l)-3 also issued under 26 U.S.C. 7701(l).

Section 1.7701(l)-4 also issued under 26 U.S.C. 7701(l) and 954(c)(6)(A).

Section 1.7702-2 also issued under 26 U.S.C. 7702(k).

Section 1.7872-5T also issued under 26 U.S.C. 7872.

Section 1.7872-15 also issued under 26 U.S.C. 1275 and 7872.

Section 1.7874-1 also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-1T also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-2 also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-3 is also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-4 also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-4T also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-5 also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-5T also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-6 also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-7 also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-8 also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-9 also issued under 26 U.S.C. 7874(c)(6) and (g).

Section 1.7874-10 also issued under 26 U.S.C. 7874(c)(4) and (g).

Section 1.7874-11 also issued under 26 U.S.C. 7874(g).

Section 1.7874-12 also issued under 26 U.S.C. 7874(g).

Source:

T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, unless otherwise noted.

Source:

T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, T.D. 9381, 73 FR 8604, Feb. 15, 2008, unless otherwise noted.

Source:

T.D. 6500, 25 FR 11607, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source:

T.D. 6500, 25 FR 11737, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source:

T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source:

T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Source:

Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted.

Source:

Sections 1.1401-1 through 1.1403-1 contained in T.D. 6691, 28 FR 12796, Dec. 3, 1963, unless otherwise noted. RELATED RULES

§ 1.0-1 Internal Revenue Code of 1954 and regulations.

(a) Enactment of law. The Internal Revenue Code of 1954 which became law upon enactment of Public Law 591, 83d Congress, approved August 16, 1954, provides in part as follows:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That

(a) Citation. (1) The provisions of this Act set forth under the heading “Internal Revenue Title” may be cited as the “Internal Revenue Code of 1954”

(2) The Internal Revenue Code enacted on February 10, 1939, as amended, may be cited as the “Internal Revenue Code of 1939”.

(b) Publication. This Act shall be published as volume 68A of the United States Statutes at Large, with a comprehensive table of contents and an appendix; but without an index or marginal references. The date of enactment, bill number, public law number, and chapter number, shall be printed as a headnote.

(c) Cross reference. For saving provisions, effective date provisions, and other related provisions, see chapter 80 (sec. 7801 and following) of the Internal Revenue Code of 1954.

(d) Enactment of Internal Revenue Title into law. The Internal Revenue Title referred to in subsection (a)(1) is as follows:

In general, the provisions of the Internal Revenue Code of 1954 are applicable with respect to taxable years beginning after December 31, 1953, and ending after August 16, 1954. Certain provisions of that Code are deemed to be included in the Internal Revenue Code of 1939. See section 7851.

(b) Scope of regulations. The regulations in this part deal with (1) the income taxes imposed under subtitle A of the Internal Revenue Code of 1954, and (2) certain administrative provisions contained in subtitle F of such Code relating to such taxes. In general, the applicability of such regulations is commensurate with the applicability of the respective provisions of the Internal Revenue Code of 1954 except that with respect to the provisions of the Internal Revenue Code of 1954 which are deemed to be included in the Internal Revenue Code of 1939, the regulations relating to such provisions are applicable to certain fiscal years and short taxable years which are subject to the Internal Revenue Code of 1939. Those provisions of the regulations which are applicable to taxable years subject to the Internal Revenue Code of 1939 and the specific taxable years to which such provisions are so applicable are identified in each instance. The regulations in 26 CFR (1939) part 39 (Regulations 118) are continued in effect until superseded by the regulations in this part. See Treasury Decision 6091, approved August 16, 1954 (19 FR 5167, C.B. 1954-2, 47).

Normal Taxes and Surtaxes

DETERMINATION OF TAX LIABILITY

Tax on Individuals

§ 1.1-1 Income tax on individuals.

(a) General rule.

(1) Section 1 of the Code imposes an income tax on the income of every individual who is a citizen or resident of the United States and, to the extent provided by section 871(b) or 877(b), on the income of a nonresident alien individual. For optional tax in the case of taxpayers with adjusted gross income of less than $10,000 (less than $5,000 for taxable years beginning before January 1, 1970) see section 3. The tax imposed is upon taxable income (determined by subtracting the allowable deductions from gross income). The tax is determined in accordance with the table contained in section 1. See subparagraph (2) of this paragraph for reference guides to the appropriate table for taxable years beginning on or after January 1, 1964, and before January 1, 1965, taxable years beginning after December 31, 1964, and before January 1, 1971, and taxable years beginning after December 31, 1970. In certain cases credits are allowed against the amount of the tax. See part IV (section 31 and following), subchapter A, chapter 1 of the Code. In general, the tax is payable upon the basis of returns rendered by persons liable therefor (subchapter A (sections 6001 and following), chapter 61 of the Code) or at the source of the income by withholding. For the computation of tax in the case of a joint return of a husband and wife, or a return of a surviving spouse, for taxable years beginning before January 1, 1971, see section 2. The computation of tax in such a case for taxable years beginning after December 31, 1970, is determined in accordance with the table contained in section 1(a) as amended by the Tax Reform Act of 1969. For other rates of tax on individuals, see section 5(a). For the imposition of an additional tax for the calendar years 1968, 1969, and 1970, see section 51(a).

(2)

(i) For taxable years beginning on or after January 1, 1964, the tax imposed upon a single individual, a head of a household, a married individual filing a separate return, and estates and trusts is the tax imposed by section 1 determined in accordance with the appropriate table contained in the following subsection of section 1:

Taxable years beginning in 1964 Taxable years beginning after 1964 but before 1971 Taxable years beginning after Dec. 31, 1970 (references in this column are to the Code as amended by the Tax Reform Act of 1969)
Single individual Sec. 1(a)(1) Sec. 1(a)(2) Sec. 1(c).
Head of a household Sec. 1(b)(1) Sec. 1(b)(2) Sec. 1(b).
Married individual filing a separate return Sec. 1(a)(1) Sec. 1(a)(2) Sec. 1(d).
Estates and trusts Sec. 1(a)(1) Sec. 1(a)(2) Sec. 1(d).

(ii) For taxable years beginning after December 31, 1970, the tax imposed by section 1(d), as amended by the Tax Reform Act of 1969, shall apply to the income effectively connected with the conduct of a trade or business in the United States by a married alien individual who is a nonresident of the United States for all or part of the taxable year or by a foreign estate or trust. For such years the tax imposed by section 1(c), as amended by such Act, shall apply to the income effectively connected with the conduct of a trade or business in the United States by an unmarried alien individual (other than a surviving spouse) who is a nonresident of the United States for all or part of the taxable year. See paragraph (b)(2) of § 1.871-8.

(3) The income tax imposed by section 1 upon any amount of taxable income is computed by adding to the income tax for the bracket in which that amount falls in the appropriate table in section 1 the income tax upon the excess of that amount over the bottom of the bracket at the rate indicated in such table.

(4) The provisions of section 1 of the Code, as amended by the Tax Reform Act of 1969, and of this paragraph may be illustrated by the following examples:

Example 1.

A, an unmarried individual, had taxable income for the calendar year 1964 of $15,750. Accordingly, the tax upon such taxable income would be $4,507.50, computed as follows from the table in section 1(a)(1):

Tax on $14,000 (from table) $3,790.00
Tax on $1,750 (at 41 percent as determined from the table) 717.50
Total tax on $15,750 4,507.50

Example 2.

Assume the same facts as in example (1), except the figures are for the calendar year 1965. The tax upon such taxable income would be $4,232.50, computed as follows from the table in section 1(a)(2):

Tax on $14,000 (from table) $3,550.00
Tax on $1,750 (at 39 percent as determined from the table) 682.50
Total tax on $15,750 4,232.50

Example 3.

Assume the same facts as in example (1), except the figures are for the calendar year 1971. The tax upon such taxable income would be $3,752.50, computed as follows from the table in section 1(c), as amended:

Tax on $14,000 (from table) $3,210.00
Tax on $1,750 (at 31 percent as determined from the table) 542.50
Total tax on $15,750 3,752.50

(b) Citizens or residents of the United States liable to tax. In general, all citizens of the United States, wherever resident, and all resident alien individuals are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States. Pursuant to section 876, a nonresident alien individual who is a bona fide resident of a section 931 possession (as defined in § 1.931-1(c)(1) of this chapter) or Puerto Rico during the entire taxable year is, except as provided in section 931 or 933 with respect to income from sources within such possessions, subject to taxation in the same manner as a resident alien individual. As to tax on nonresident alien individuals, see sections 871 and 877.

(c) Who is a citizen. Every person born or naturalized in the United States and subject to its jurisdiction is a citizen. For other rules governing the acquisition of citizenship, see chapters 1 and 2 of title III of the Immigration and Nationality Act (8 U.S.C. 1401-1459). For rules governing loss of citizenship, see sections 349 to 357, inclusive, of such Act (8 U.S.C. 1481-1489), Schneider v. Rusk, (1964) 377 U.S. 163, and Rev. Rul. 70-506, C.B. 1970-2, 1. For rules pertaining to persons who are nationals but not citizens at birth, e.g., a person born in American Samoa, see section 308 of such Act (8 U.S.C. 1408). For special rules applicable to certain expatriates who have lost citizenship with a principal purpose of avoiding certain taxes, see section 877. A foreigner who has filed his declaration of intention of becoming a citizen but who has not yet been admitted to citizenship by a final order of a naturalization court is an alien.

(d) Effective/applicability date. The second sentence of paragraph (b) of this section applies to taxable years ending after April 9, 2008.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960, as amended by T.D. 7332, 39 FR 44216, Dec. 23, 1974; T.D. 9391, 73 FR 19358, Apr. 9, 2008]

§ 1.1-2 Limitation on tax.

(a) Taxable years ending before January 1, 1971. For taxable years ending before January 1, 1971, the tax imposed by section 1 (whether by subsection (a) or subsection (b) thereof) shall not exceed 87 percent of the taxable income for the taxable year. For purposes of determining this limitation the tax under section 1 (a) or (b) and the tax at the 87-percent rate shall each be computed before the allowance of any credits against the tax. Where the alternative tax on capital gains is imposed under section 1201(b), the 87-percent limitation shall apply only to the partial tax computed on the taxable income reduced by 50 percent of the excess of net long-term capital gains over net short-term capital losses. Where, for purposes of computations under the income averaging provisions, section 1201(b) is treated as imposing the alternative tax on capital gains computed under section 1304(e)(2), the 87-percent limitation shall apply only to the tax equal to the tax imposed by section 1, reduced by the amount of the tax imposed by section 1 which is attributable to capital gain net income for the computation year.

(b) Taxable years beginning after December 31, 1970. If, for any taxable year beginning after December 31, 1970, an individual has earned taxable income which exceeds his taxable income as defined by section 1348, the tax imposed by section 1, as amended by the Tax Reform Act of 1969, shall not exceed the sum computed under the provisions of section 1348. For imposition of minimum tax for tax preferences see sections 56 through 58.

[T.D. 7117, 36 FR 9397, May 25, 1971]

§ 1.1-3 Change in rates applicable to taxable year.

For computation of the tax for a taxable year during which a change in the tax rates occurs, see section 21 and the regulations thereunder.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960. Redesignated by T.D. 7117, 36 FR 9397, May 25, 1971]

§ 1.1(h)-1 Capital gains look-through rule for sales or exchanges of interests in a partnership, S corporation, or trust.

(a) In general. When an interest in a partnership held for more than one year is sold or exchanged, the transferor may recognize ordinary income (e.g., under section 751(a)), collectibles gain, section 1250 capital gain, and residual long-term capital gain or loss. When stock in an S corporation held for more than one year is sold or exchanged, the transferor may recognize ordinary income (e.g., under sections 304, 306, 341, 1254), collectibles gain, and residual long-term capital gain or loss. When an interest in a trust held for more than one year is sold or exchanged, a transferor who is not treated as the owner of the portion of the trust attributable to the interest sold or exchanged (sections 673 through 679) (a non-grantor transferor) may recognize collectibles gain and residual long-term capital gain or loss.

(b) Look-through capital gain -

(1) In general. Look-through capital gain is the share of collectibles gain allocable to an interest in a partnership, S corporation, or trust, plus the share of section 1250 capital gain allocable to an interest in a partnership, determined under paragraphs (b)(2) and (3) of this section.

(2) Collectibles gain -

(i) Definition. For purposes of this section, collectibles gain shall be treated as gain from the sale or exchange of a collectible (as defined in section 408(m) without regard to section 408(m)(3)) that is a capital asset held for more than 1 year.

(ii) Share of collectibles gain allocable to an interest in a partnership, S corporation, or a trust. When an interest in a partnership, S corporation, or trust held for more than one year is sold or exchanged in a transaction in which all realized gain is recognized, the transferor shall recognize as collectibles gain the amount of net gain (but not net loss) that would be allocated to that partner (taking into account any remedial allocation under § 1.704-3(d)), shareholder, or beneficiary (to the extent attributable to the portion of the partnership interest, S corporation stock, or trust interest transferred that was held for more than one year) if the partnership, S corporation, or trust transferred all of its collectibles for cash equal to the fair market value of the assets in a fully taxable transaction immediately before the transfer of the interest in the partnership, S corporation, or trust. If less than all of the realized gain is recognized upon the sale or exchange of an interest in a partnership, S corporation, or trust, the same methodology shall apply to determine the collectibles gain recognized by the transferor, except that the partnership, S corporation, or trust shall be treated as transferring only a proportionate amount of each of its collectibles determined as a fraction that is the amount of gain recognized in the sale or exchange over the amount of gain realized in the sale or exchange. With respect to the transfer of an interest in a trust, this paragraph (b)(2) applies only to transfers by non-grantor transferors (as defined in paragraph (a) of this section). This paragraph (b)(2) does not apply to a transaction that is treated, for Federal income tax purposes, as a redemption of an interest in a partnership, S corporation, or trust.

(3) Section 1250 capital gain -

(i) Definition. For purposes of this section, section 1250 capital gain means the capital gain (not otherwise treated as ordinary income) that would be treated as ordinary income if section 1250(b)(1) included all depreciation and the applicable percentage under section 1250(a) were 100 percent.

(ii) Share of section 1250 capital gain allocable to interest in partnership. When an interest in a partnership held for more than one year is sold or exchanged in a transaction in which all realized gain is recognized, there shall be taken into account under section 1(h)(7)(A)(i) in determining the partner's unrecaptured section 1250 gain the amount of section 1250 capital gain that would be allocated (taking into account any remedial allocation under § 1.704-3(d)) to that partner (to the extent attributable to the portion of the partnership interest transferred that was held for more than one year) if the partnership transferred all of its section 1250 property in a fully taxable transaction for cash equal to the fair market value of the assets immediately before the transfer of the interest in the partnership. If less than all of the realized gain is recognized upon the sale or exchange of an interest in a partnership, the same methodology shall apply to determine the section 1250 capital gain recognized by the transferor, except that the partnership shall be treated as transferring only a proportionate amount of each section 1250 property determined as a fraction that is the amount of gain recognized in the sale or exchange over the amount of gain realized in the sale or exchange. This paragraph (b)(3) does not apply to a transaction that is treated, for Federal income tax purposes, as a redemption of a partnership interest.

(iii) Limitation with respect to net section 1231 gain. In determining a transferor partner's net section 1231 gain (as defined in section 1231(c)(3)) for purposes of section 1(h)(7)(B), the transferor partner's allocable share of section 1250 capital gain in partnership property shall not be treated as section 1231 gain, regardless of whether the partnership property is used in the trade or business (as defined in section 1231(b)).

(c) Residual long-term capital gain or loss. The amount of residual long-term capital gain or loss recognized by a partner, shareholder of an S corporation, or beneficiary of a trust on account of the sale or exchange of an interest in a partnership, S corporation, or trust shall equal the amount of long-term capital gain or loss that the partner would recognize under section 741, that the shareholder would recognize upon the sale or exchange of stock of an S corporation, or that the beneficiary would recognize upon the sale or exchange of an interest in a trust (pre-look-through long-term capital gain or loss) minus the amount of look-through capital gain determined under paragraph (b) of this section.

(d) Special rule for tiered entities. In determining whether a partnership, S corporation, or trust has gain from collectibles, such partnership, S corporation, or trust shall be treated as owning its proportionate share of the collectibles of any partnership, S corporation, or trust in which it owns an interest either directly or indirectly through a chain of such entities. In determining whether a partnership has section 1250 capital gain, such partnership shall be treated as owning its proportionate share of the section 1250 property of any partnership in which it owns an interest, either directly or indirectly through a chain of partnerships.

(e) Notification requirements. Reporting rules similar to those that apply to the partners and the partnership under section 751(a) shall apply in the case of sales or exchanges of interests in a partnership, S corporation, or trust that cause holders of such interests to recognize collectibles gain and in the case of sales or exchanges of interests in a partnership that cause holders of such interests to recognize section 1250 capital gain. See § 1.751-1(a)(3).

(f) Examples. The following examples illustrate the requirements of this section:

Example 1. Collectibles gain.

(i) A and B are equal partners in a personal service partnership (PRS). B transfers B's interest in PRS to T for $15,000 when PRS's balance sheet (reflecting a cash receipts and disbursements method of accounting) is as follows:

ASSETS
Adjusted basis Market value
Cash $3,000 $3,000
Loans Owed to Partnership 10,000 10,000
Collectibles 1,000 3,000
Other Capital Assets 6,000 2,000
Capital Assets 7,000 5,000
Unrealized Receivables 0 14,000
Total 20,000 32,000
LIABILITIES AND CAPITAL
Adjusted basis Market value
Liabilities 2,000 2,000
Capital:
A 9,000 15,000
B 9,000 15,000
Total 20,000 32,000

(ii) At the time of the transfer, B has held the interest in PRS for more than one year, and B's basis for the partnership interest is $10,000 ($9,000 plus $1,000, B's share of partnership liabilities). None of the property owned by PRS is section 704(c) property. The total amount realized by B is $16,000, consisting of the cash received, $15,000, plus $1,000, B's share of the partnership liabilities assumed by T. See section 752. B's undivided one-half interest in PRS includes a one-half interest in the partnership's unrealized receivables and a one-half interest in the partnership's collectibles.

(iii) If PRS were to sell all of its section 751 property in a fully taxable transaction for cash equal to the fair market value of the assets immediately prior to the transfer of B's partnership interest to T, B would be allocated $7,000 of ordinary income from the sale of PRS's unrealized receivables. Therefore, B will recognize $7,000 of ordinary income with respect to the unrealized receivables. The difference between the amount of capital gain or loss that the partner would realize in the absence of section 751 ($6,000) and the amount of ordinary income or loss determined under § 1.751-1(a)(2) ($7,000) is the partner's capital gain or loss on the sale of the partnership interest under section 741. In this case, the transferor has a $1,000 pre-look-through long-term capital loss.

(iv) If PRS were to sell all of its collectibles in a fully taxable transaction for cash equal to the fair market value of the assets immediately prior to the transfer of B's partnership interest to T, B would be allocated $1,000 of gain from the sale of the collectibles. Therefore, B will recognize $1,000 of collectibles gain on account of the collectibles held by PRS.

(v) The difference between the transferor's pre-look-through long-term capital gain or loss (−$1,000) and the look-through capital gain determined under this section ($1,000) is the transferor's residual long-term capital gain or loss on the sale of the partnership interest. Under these facts, B will recognize a $2,000 residual long-term capital loss on account of the sale or exchange of the interest in PRS.

Example 2. Special allocations.

Assume the same facts as in Example 1, except that under the partnership agreement, all gain from the sale of the collectibles is specially allocated to B, and B transfers B's interest to T for $16,000. All items of income, gain, loss, or deduction of PRS, other than the gain from the collectibles, are divided equally between A and B. Under these facts, B's amount realized is $17,000, consisting of the cash received, $16,000, plus $1,000, B's share of the partnership liabilities assumed by T. See section 752. B will recognize $7,000 of ordinary income with respect to the unrealized receivables (determined under § 1.751-1(a)(2)). Accordingly, B's pre-look-through long-term capital gain would be $0. If PRS were to sell all of its collectibles in a fully taxable transaction for cash equal to the fair market value of the assets immediately prior to the transfer of B's partnership interest to T, B would be allocated $2,000 of gain from the sale of the collectibles. Therefore, B will recognize $2,000 of collectibles gain on account of the collectibles held by PRS. B will recognize a $2,000 residual long-term capital loss on account of the sale of B's interest in PRS.

Example 3. Net collectibles loss ignored.

Assume the same facts as in Example 1, except that the collectibles held by PRS have an adjusted basis of $3,000 and a fair market value of $1,000, and the other capital assets have an adjusted basis of $4,000 and a fair market value of $4,000. (The total adjusted basis and fair market value of the partnership's capital assets are the same as in Example 1.) If PRS were to sell all of its collectibles in a fully taxable transaction for cash equal to the fair market value of the assets immediately prior to the transfer of B's partnership interest to T, B would be allocated $1,000 of loss from the sale of the collectibles. Because none of the gain from the sale of the interest in PRS is attributable to unrealized appreciation in the value of collectibles held by PRS, the net loss in collectibles held by PRS is not recognized at the time B transfers the interest in PRS. B will recognize $7,000 of ordinary income (determined under § 1.751-1(a)(2)) and a $1,000 long-term capital loss on account of the sale of B's interest in PRS.

Example 4. Collectibles gain in an S corporation.

(i) A corporation (X) has always been an S corporation and is owned by individuals A, B, and C. In 1996, X invested in antiques. Subsequent to their purchase, the antiques appreciated in value by $300. A owns one-third of the shares of X stock and has held that stock for more than one year. A's adjusted basis in the X stock is $100. If A were to sell all of A's X stock to T for $150, A would realize $50 of pre-look-through long-term capital gain.

(ii) If X were to sell its antiques in a fully taxable transaction for cash equal to the fair market value of the assets immediately before the transfer to T, A would be allocated $100 of gain on account of the sale. Therefore, A will recognize $100 of collectibles gain (look-through capital gain) on account of the collectibles held by X.

(iii) The difference between the transferor's pre-look-through long-term capital gain or loss ($50) and the look-through capital gain determined under this section ($100) is the transferor's residual long-term capital gain or loss on the sale of the S corporation stock. Under these facts, A will recognize $100 of collectibles gain and a $50 residual long-term capital loss on account of the sale of A's interest in X.

Example 5. Sale or exchange of partnership interest where part of the interest has a short-term holding period.

(i) A, B, and C form an equal partnership (PRS). In connection with the formation, A contributes $5,000 in cash and a capital asset with a fair market value of $5,000 and a basis of $2,000; B contributes $7,000 in cash and a collectible with a fair market value of $3,000 and a basis of $3,000; and C contributes $10,000 in cash. At the time of the contribution, A had held the contributed property for two years. Six months later, when A's basis in PRS is $7,000, A transfers A's interest in PRS to T for $14,000 at a time when PRS's balance sheet (reflecting a cash receipts and disbursements method of accounting) is as follows:

ASSETS
Adjusted basis Market value
Cash $22,000 $22,000
Unrealized Receivables 0 6,000
Capital Asset 2,000 5,000
Collectible 3,000 9,000
Capital Assets 5,000 14,000
Total 27,000 42,000

(ii) Although at the time of the transfer A has not held A's interest in PRS for more than one year, 50 percent of the fair market value of A's interest in PRS was received in exchange for a capital asset with a long-term holding period. Therefore, 50 percent of A's interest in PRS has a long-term holding period. See § 1.1223-3(b)(1).

(iii) If PRS were to sell all of its section 751 property in a fully taxable transaction immediately before A's transfer of the partnership interest, A would be allocated $2,000 of ordinary income. Accordingly, A will recognize $2,000 ordinary income and $5,000 ($7,000-$2,000) of capital gain on account of the transfer to T of A's interest in PRS. Fifty percent ($2,500) of that gain is long-term capital gain and 50 percent ($2,500) is short-term capital gain. See § 1.1223-3(c)(1).

(iv) If the collectible were sold or exchanged in a fully taxable transaction immediately before A's transfer of the partnership interest, A would be allocated $2,000 of gain attributable to the collectible. The gain attributable to the collectible that is allocable to the portion of the transferred interest in PRS with a long-term holding period is $1,000 (50 percent of $2,000). Accordingly, A will recognize $1,000 of collectibles gain on account of the transfer of A's interest in PRS.

(v) The difference between the amount of pre-look-through long-term capital gain or loss ($2,500) and the look-through capital gain ($1,000) is the amount of residual long-term capital gain or loss that A will recognize on account of the transfer of A's interest in PRS. Under these facts, A will recognize a residual long-term capital gain of $1,500 and a short-term capital gain of $2,500.

(g) Effective date. This section applies to transfers of interests in partnerships, S corporations, and trusts that occur on or after September 21, 2000.

[T.D. 8902, 65 FR 57096, Sept. 21, 2000]

§ 1.1(i)-1T Questions and answers relating to the tax on unearned income certain minor children (Temporary).

In General

Q-1. To whom does section 1(i) apply?

A-1. Section 1(i) applies to any child who is under 14 years of age at the close of the taxable year, who has at least one living parent at the close of the taxable year, and who recognizes over $1,000 of unearned income during the taxable year.

Q-2. What is the effective date of section 1(i)?

A-2. Section 1(i) applies to taxable years of the child beginning after December 31, 1986.

Computation of Tax

Q-3. What is the amount of tax imposed by section 1 on a child to whom section 1(i) applies?

A-3. In the case of a child to whom section 1(i) applies, the amount of tax imposed by section 1 equals the greater of (A) the tax imposed by section 1 without regard to section 1(i) or (B) the sum of the tax that would be imposed by section 1 if the child's taxable income was reduced by the child's net unearned income, plus the child's share of the allocable parental tax.

Q-4. What is the allocable parental tax?

A-4. The allocable parental tax is the excess of (A) the tax that would be imposed by section 1 on the sum of the parent's taxable income plus the net unearned income of all children of such parent to whom section 1(i) applies, over (B) the tax imposed by section 1 on the parent's taxable income. Thus, the allocable parental tax is not computed with reference to unearned income of a child over 14 or a child under 14 with less than $1,000 of unearned income. See A-10 through A-13 for rules regarding the determination of the parent(s) whose taxable income is taken into account under section 1(i). See A-14 for rules regarding the determination of children of the parent whose net unearned income is taken into account under section 1(i).

Q-5. What is the child's share of the allocable parental tax?

A-5. The child's share of the allocable parental tax is an amount that bears the same ratio to the total allocable parental tax as the child's net unearned income bears to the total net unearned income of all children of such parent to whom section 1(i) applies. See A-14.

Example 1.

During 1988, D, and a 12 year old, receives $5,000 of unearned income and no earned income. D has no itemized deductions and is not eligible for a personal exemption. D's parents have two other children, E, a 15 year old, and F, a 10 year old. E has $10,000 of unearned income and F has $100 of unearned income. D's parents file a joint return for 1988 and report taxable income of $70,000. Neither D's nor his parent's taxable income is attributable to net capital gain. D's tax liability for 1988, determined without regard to section 1(i), is $675 on $4,500 of taxable income ($5,000 less $500 allowable standard deduction). In applying section 1(i), D's tax would be equal to the sum of (A) the tax that would be imposed on D's taxable income if it were reduced by any net unearned income, plus (B) D's share of the allocable parental tax. Only D's unearned income is taken into account in determining the allocable parental tax because E is over 14 and F has less than $1,000 of unearned income. See A-4. D's net unearned income is $4,000 ($4,500 taxable unearned income less $500). The tax imposed on D's taxable income as reduced by D's net unearned income is $75 ($500 × 15%). The allocable parental tax is $1,225, the excess of $16,957.50 (the tax on $74,000, the parent's taxable income plus D's net unearned income) over $15,732.50 (the tax on $70,000, the parent's taxable income). See A-4. Thus, D's tax under section 1(i)(1)(B) is $1,300 ($1,225 + $75). Since this amount is greater than the amount of D's tax liability as determined without regard to section 1(i), the amount of tax imposed on D for 1988 is $1,300. See A-3.

Example 2.

H and W have 3 children, A, B, and C, who are all under 14 years of age. For the taxable year 1988, H and W file a joint return and report taxable income of $129,750. The tax imposed by section 1 on H and W is $35,355. A has $5,000 of net unearned income and B and C each have $2,500 of net unearned income during 1988. The allocable parental tax imposed on A, B, and C's combined net unearned income of $10,000 is $3,300. This tax is the excess of $38,655, which is the tax imposed by section 1 on $139,750 ($129,750 + 10,000), over $35,355 (the tax imposed by section 1 on H and W's taxable income of $129,750). See A-4. Each child's share of the allocable parental tax is an amount that bears the same ratio to the total allocable parental tax as the child's net unearned income bears to the total net unearned income of A, B, and C. Thus, A's share of the allocable parental tax is $1,650 (5,000 ÷ 10,000 × 3,300) and B and C's share of the tax is $825 (2,500 ÷ 10,000 × 3,300) each. See A-5.

Definition of Net Unearned Income

Q-6. What is net unearned income?

A-6. Net unearned income is the excess of the portion of adjusted gross income for the taxable year that is not “earned income” as defined in section 911(d)(2) (income that is not attributable to wages, salaries, or other amounts received as compensation for personal services), over the sum of the standard deduction amount provided for under section 63 (c)(5)(A) ($500 for 1987 and 1988; adjusted for inflation thereafter), plus the greater of (A) $500 (adjusted for inflation after 1988) or (B) the amount of allowable itemized deductions that are directly connected with the production of unearned income. A child's net unearned income for any taxable year shall not exceed the child's taxable income for such year.

Example 3.

A is a child who is under 14 years of age at the end of the taxable year 1987. Both of A's parents are alive at this time. During 1987, A receives $3,000 of interest from a bank savings account and earns $1,000 from a paper route and performing odd jobs. A has no itemized deductions for 1987. A's standard deduction is $1,000, which is an amount equal to A's earned income for 1987. Of this amount, $500 is applied against A's unearned income and the remaining $500 is applied against A's earned income. Thus, A's $500 of taxable earned income ($1,000 less the remaining $500 of the standard deduction) is taxed without regard to section 1 (i); A has $2,500 of taxable unearned income ($3,000 gross unearned income less $500 of the standard deduction) of which $500 is taxed without regard to section 1(i). The remaining $2,000 of taxable unearned income is A's net unearned income and is taxed under section 1(i).

Example 4.

B is a child who is subject to tax under section 1(i). B has $400 of earned income and $2,000 of unearned income. B has itemized deductions of $800 (net of the 2 percent of adjusted gross income (AGI) floor on miscellaneous itemized deductions under section 67) of which $200 are directly connected with the production of unearned income. The amount of itemized deductions that B may apply against unearned income is equal to the greater of $500 or the deductions directly connected with the production of unearned income. See A-6. Thus, $500 of B's itemized deductions are applied against the $2,000 of unearned income and the remaining $300 of deductions are applied against earned income. As a result, B has taxable earned income of $100 and taxable unearned income of $1,500. Of these amounts, all of the earned income and $500 of the unearned income are taxed without regard to section 1(i). The remaining $1,000 of unearned income is net unearned income and is taxed under section 1(i).

Unearned Income Subject to tax Under Section 1(i)

Q-7. Will a child be subject to tax under section 1(i) on net unearned income (as defined in section 1(i) (4) and A-6 of this section) that is attributable to property transferred to the child prior to 1987?

A-7. Yes. The tax imposed by section 1(i) on a child's net unearned income applies to any net unearned income of the child for taxable years beginning after December 31, 1986, regardless of when the underlying assets were transferred to the child.

Q-8. Will a child be subject to tax under section 1(i) on net unearned income that is attributable to gifts from persons other than the child's parents or attributable to assets resulting from the child's earned income?

A-8. Yes. The tax imposed by section 1(i) applies to all net unearned income of the child, regardless of the source of the assets that produced such income. Thus, the rules of section 1(i) apply to income attributable to gifts not only from the parents but also from any other source, such as the child's grandparents. Section 1(i) also applies to unearned income derived with respect to assets resulting from earned income of the child, such as interest earned on bank deposits.

Example 5.

A is a child who is under 14 years of age at the end of the taxable year beginning on January 1, 1987. Both of A's parents are alive at the end of the taxable year. During 1987, A receives $2,000 in interest from his bank account and $1,500 from a paper route. Some of the interest earned by A from the bank account is attributable to A's paper route earnings that were deposited in the account. The balance of the account is attributable to cash gifts from A's parents and grandparents and interest earned prior to 1987. Some cash gifts were received by A prior to 1987. A has no itemized deductions and is eligible to be claimed as a dependent on his parent's return. Therefore, for the taxable year 1987, A's standard deduction is $1,500, the amount of A's earned income. Of this standard deduction amount, $500 is allocated against unearned income and $1,000 is allocated against earned income. A's taxable unearned income is $1,500 of which $500 is taxed without regard to section 1(i). The remaining taxable unearned income of $1,000 is net unearned income and is taxed under section 1(i). The fact that some of A's unearned income is attributable to interest on principal created by earned income and gifts from persons other than A's parents or that some of the unearned income is attributable to property transferred to A prior to 1987, will not affect the tax treatment of this income under section 1(i). See A-8.

Q-9. For purposes of section 1(i), does income which is not earned income (as defined in section 911(d)(2)) include social security benefits or pension benefits that are paid to the child?

A-9. Yes. For purposes of section 1(i), earned income (as defined in section 911(d)(2)) does not include any social security or pension benefits paid to the child. Thus, such amounts are included in unearned income to the extent they are includible in the child's gross income.

Determination of the Parent's Taxable Income

Q-10. If a child's parents file a joint return, what is the taxable income that must be taken into account by the child in determining tax liability under section 1(i)?

A-10. In the case of parents who file a joint return, the parental taxable income to be taken into account in determining the tax liability of a child is the total taxable income shown on the joint return.

Q-11. If a child's parents are married and file separate tax returns, which parent's taxable income must be taken into account by the child in determining tax liability under section 1(i)?

A-11. For purposes of determining the tax liability of a child under section 1(i), where such child's parents are married and file separate tax returns, the parent whose taxable income is the greater of the two for the taxable year shall be taken into account.

Q-12. If the parents of a child are divorced, legally separated, or treated as not married under section 7703(b), which parent's taxable income is taken into account in computing the child's tax liability?

A-12. If the child's parents are divorced, legally separated, or treated as not married under section 7703(b), the taxable income of the custodial parent (within the meaning of section 152(e)) of the child is taken into account under section 1(i) in determining the child's tax liability.

Q-13. If a parent whose taxable income must be taken into account in determining a child's tax liability under section 1(i) files a joint return with a spouse who is not a parent of the child, what taxable income must the child take into account?

A-13. The amount of a parent's taxable income that a child must take into account for purposes of section 1(i) where the parent files a joint return with a spouse who is not a parent of the child is the total taxable income shown on such joint return.

Children of the Parent

Q-14. In determining a child's share of the allocable parental tax, is the net unearned income of legally adopted children, children related to such child by half-blood, or children from a prior marriage of the spouse of such child's parent taken into account in addition to the natural children of such child's parent?

A-14. Yes. In determining a child's share of the allocable parental tax, the net unearned income of all children subject to tax under section 1(i) and who use the same parent's taxable income as such child to determine their tax liability under section 1(i) must be taken into account. Such children are taken into account regardless of whether they are adopted by the parent, related to such child by half-blood, or are children from a prior marriage of the spouse of such child's parent.

Rules Regarding Income From a Trust or Similar Instrument

Q-15. Will the unearned income of a child who is subject to section 1(i) that is attributable to gifts given to the child under the Uniform Gift to Minors Act (UGMA) be subject to tax under section 1(i)?

A-15. Yes. A gift under the UGMA vests legal title to the property in the child although an adult custodian is given certain rights to deal with the property until the child attains majority. Any unearned income attributable to such a gift is the child's unearned income and is subject to tax under section 1(i), whether distributed to the child or not.

Q-16. Will a child who is a beneficiary of a trust be required to take into account the income of a trust in determining the child's tax liability under section 1(i)?

A-16. The income of a trust must be taken into account for purposes of determining the tax liability of a beneficiary who is subject to section 1(i) only to the extent it is included in the child's gross income for the taxable year under sections 652(a) or 662(a). Thus, income from a trust for the fiscal taxable year of a trust ending during 1987, that is included in the gross income of a child who is subject to section 1(i) and who has a calendar taxable year, will be subject to tax under section 1(i) for the child's 1987 taxable year.

Subsequent Adjustments

Q-17. What effect will a subsequent adjustment to a parent's taxable income have on the child's tax liability if such parent's taxable income was used to determine the child's tax liability under section 1(i) for the same taxable year?

A-17. If the parent's taxable income is adjusted and if, for the same taxable year as the adjustment, the child paid tax determined under section 1(i) with reference to that parent's taxable income, then the child's tax liability under section 1(i) must be recomputed using the parent's taxable income as adjusted.

Q-18. In the case where more than one child who is subject to section 1(i) uses the same parent's taxable income to determine their allocable parental tax, what effect will a subsequent adjustment to the net unearned income of one child have on the other child's share of the allocable parental tax?

A-18. If, for the same taxable year, more than one child uses the same parent's taxable income to determine their share of the allocable parental tax and a subsequent adjustment is made to one or more of such children's net unearned income, each child's share of the allocable parental tax must be recomputed using the combined net unearned income of all such children as adjusted.

Q-19. If a recomputation of a child's tax under section 1(i), as a result of an adjustment to the taxable income of the child's parents or another child's net unearned income, results in additional tax being imposed by section 1(i) on the child, is the child subject to interest and penalties on such additional tax?

A-19. Any additional tax resulting from an adjustment to the taxable income of the child's parents or the net unearned income of another child shall be treated as an underpayment of tax and interest shall be imposed on such underpayment as provided in section 6601. However, the child shall not be liable for any penalties on the underpayment resulting from additional tax being imposed under section 1(i) due to such an adjustment.

Example 6.

D and M are the parents of C, a child under the age of 14. D and M file a joint return for 1988 and report taxable income of $69,900. C has unearned income of $3,000 and no itemized deductions for 1988. C properly reports a total tax liability of $635 for 1988. This amount is the sum of the allocable parental tax of $560 on C's net unearned income of $2,000 (the excess of $3,000 over the sum of $500 standard deduction and the first $500 of taxable unearned income) plus $75 (the tax imposed on C's first $500 of taxable unearned income). See A-3. One year later, D and M's 1988 tax return is adjusted on audit by adding an additional $1,000 of taxable income. No adjustment is made to the amount reported as C's net unearned income for 1988. However, the adjustment to D and M's taxable income causes C's tax liability under section 1(i) for 1988 to be increased by $50 as a result of the phase-out of the 15 percent rate bracket. See A-20. In addition to this further tax liability, C will be liable for interest on the $50. However, C will not have to pay any penalty on the delinquent amount.

Miscellaneous Rules

Q-20. Does the phase-out of the parent's 15 percent rate bracket and personal exemptions under section 1(g), if applicable, have any effect on the calculation of the allocable parental tax imposed on a child's net unearned income under section 1(i)?

A-20. Yes. Any phase-out of the parent's 15 percent rate bracket or personal exemptions under section 1(g) is given full effect in determining the tax that would be imposed on the sum of the parent's taxable income and the total net unearned income of all children of the parent. Thus, any additional tax on a child's net unearned income resulting from the phase-out of the 15 percent rate bracket and the personal exemptions is reflected in the tax liability of the child.

Q-21. For purposes of calculating a parent's tax liability or the allocable parental tax imposed on a child, are other phase-outs, limitations, or floors on deductions or credits, such as the phase-out of the $25,000 passive loss allowance for rental real estate activities under section 469(i)(3) or the 2 percent of AGI floor on miscellaneous itemized deductions under section 67, affected by the addition of a child's net unearned income to the parent's taxable income?

A-21. No. A child's net unearned income is not taken into account in computing any deduction or credit for purposes of determining the parent's tax liability or the child's allocable parental tax. Thus, for example, although the amounts allowable to the parent as a charitable contribution deduction, medical expense deduction, section 212 deduction, or a miscellaneous itemized deduction are affected by the amount of the parent's adjusted gross income, the amount of these deductions that is allowed does not change as a result of the application of section 1(i) because the amount of the parent's adjusted gross income does not include the child's net unearned income. Similarly, the amount of itemized deductions that is allowed to a child does not change as a result of section 1(i) because section 1(i) only affects the amount of tax liability and not the child's adjusted gross income.

Q-22. If a child is unable to obtain information concerning the tax return of the child's parents directly from such parents, how may the child obtain information from the parent's tax return which is necessary to determine the child's tax liability under section 1(i)?

A-22. Under section 6103(e)(1)(A)(iv), a return of a parent shall, upon written request, be open to inspection or disclosure to a child of that individual (or the child's legal representative) to the extent necessary to comply with section 1(i). Thus, a child may request the Internal Revenue Service to disclose sufficient tax information about the parent to the child so that the child can properly file his or her return.

[T.D. 8158, 52 FR 33579, Sept. 4, 1987; 52 FR 36133, Sept. 25, 1987]

§ 1.2-1 Tax in case of joint return of husband and wife or the return of a surviving spouse.

(a) Taxable year ending before January 1, 1971.

(1) For taxable years ending before January 1, 1971, in the case of a joint return of husband and wife, or the return of a surviving spouse as defined in section 2(b), the tax imposed by section 1 shall be twice the tax that would be imposed if the taxable income were reduced by one-half. For rules relating to the filing of joint returns of husband and wife, see section 6013 and the regulations thereunder.

(2) The method of computing, under section 2(a), the tax of husband and wife in the case of a joint return, or the tax of a surviving spouse, is as follows:

(i) First, the taxable income is reduced by one-half. Second, the tax is determined as provided by section 1 by using the taxable income so reduced. Third, the tax so determined, which is the tax that would be determined if the taxable income were reduced by one-half, is then multiplied by two to produce the tax imposed in the case of the joint return or the return of a surviving spouse, subject, however, to the allowance of any credits against the tax under the provisions of sections 31 through 38 and the regulations thereunder.

(ii) The limitation under section 1(c) of the tax to an amount not in excess of a specified percent of the taxable income for the taxable year is to be applied before the third step above, that is, the limitation to be applied upon the tax is determined as the applicable specified percent of one-half of the taxable income for the taxable year (such one-half of the taxable income being the actual aggregate taxable income of the spouses, or the total taxable income of the surviving spouse, as the case may be, reduced by one-half). For the percent applicable in determining the limitation of the tax under section 1(c), see § 1.1-2(a). After such limitation is applied, then the tax so limited is multiplied by two as provided in section 2(a) (the third step above).

(iii) The following computation illustrates the method of application of section 2(a) in the determination of the tax of a husband and wife filing a joint return for the calendar year 1965. If the combined gross income is $8,200, and the only deductions are the two exemptions of the taxpayers under section 151(b) and the standard deduction under section 141, the tax on the joint return for 1965, without regard to any credits against the tax, is $1,034.20 determined as follows:

1. Gross income $8,200.00
2. Less:
Standard deduction, section 141 $820
Deduction for personal exemption, section 151 1,200 2,020.00
3. Taxable income 6,180.00
4. Taxable income reduced by one-half 3,090.00
5. Tax computed by the tax table provided under section 1(a)(2) ($310 plus 19 percent of excess over $2,000) 517.10
6. Twice the tax in item 5 1,034.20

(b) Taxable years beginning after December 31, 1970.

(1) For taxable years beginning after December 31, 1970, in the case of a joint return of husband and wife, or the return of a surviving spouse as defined in section 2(a) of the Code as amended by the Tax Reform Act of 1969, the tax shall be determined in accordance with the table contained in section 1(a) of the Code as so amended. For rules relating to the filing of joint returns of husband and wife see section 6013 as amended and the regulations thereunder.

(2) The following computation illustrates the method of computing the tax of a husband and wife filing a joint return for calendar year 1971. If the combined gross income is $8,200, and the only deductions are the two exemptions of the taxpayers under section 151(b), as amended, and the standard deduction under section 141, as amended, the tax on the joint return for 1971, without regard to any credits against the tax, is $968.46, determined as follows:

1. Gross income $8,200.00
2. Less:
Standard deduction, section 141 $1,066.00
Deduction for personal exemption, section 151 1,300.00 2,366.00
3. Taxable income 5,834.00
4. Tax computed by the tax table provided under section 1(a) ($620 plus 19 percent of excess over $4,000) 968.46

(3) The limitation under section 1348 with respect to the maximum rate of tax on earned income shall apply to a married individual only if such individual and his spouse file a joint return for the taxable year.

(c) Death of a spouse. If a joint return of a husband and wife is filed under the provisions of section 6013 and if the husband and wife have different taxable years solely because of the death of either spouse, the taxable year of the deceased spouse covered by the joint return shall, for the purpose of the computation of the tax in respect of such joint return, be deemed to have ended on the date of the closing of the surviving spouse's taxable year.

(d) Computation of optional tax. For computation of optional tax in the case of a joint return or the return of a surviving spouse, see section 3 and the regulations thereunder.

(e) Change in rates. For treatment of taxable years during which a change in the tax rates occurs see section 21 and the regulations thereunder.

[T.D. 7117, 36 FR 9398, May 25, 1971]

§ 1.2-2 Definitions and special rules.

(a) Surviving spouse.

(1) If a taxpayer is eligible to file a joint return under the Internal Revenue Code of 1954 without regard to section 6013(a) (3) thereof for the taxable year in which his spouse dies, his return for each of the next 2 taxable years following the year of the death of the spouse shall be treated as a joint return for all purposes if all three of the following requirements are satisfied:

(i) He has not remarried before the close of the taxable year the return for which is sought to be treated as a joint return, and

(ii) He maintains as his home a household which constitutes for the taxable year the principal place of abode as a member of such household of a person who is (whether by blood or adoption) a son, stepson, daughter, or stepdaughter of the taxpayer, and

(iii) He is entitled for the taxable year to a deduction under section 151 (relating to deductions for dependents) with respect to such son, stepson, daughter, or stepdaughter.

(2) See paragraphs (c)(1) and (d) of this section for rules for the determination of when the taxpayer maintains as his home a household which constitutes for the taxable year the principal place of abode, as a member of such household, of another person.

(3) If the taxpayer does not qualify as a surviving spouse he may nevertheless qualify as a head of a household if he meets the requirements of § 1.2-2(b).

(4) The following example illustrates the provisions relating to a surviving spouse:

Example:

Assume that the taxpayer meets the requirements of this paragraph for the years 1967 through 1971, and that the taxpayer, whose wife died during 1966 while married to him, remarried in 1968. In 1969, the taxpayer's second wife died while married to him, and he remained single thereafter. For 1967 the taxpayer will qualify as a surviving spouse, provided that neither the taxpayer nor the first wife was a nonresident alien at any time during 1966 and that she (immediately prior to her death) did not have a taxable year different from that of the taxpayer. For 1968 the taxpayer does not qualify as a surviving spouse because he remarried before the close of the taxable year. The taxpayer will qualify as a surviving spouse for 1970 and 1971, provided that neither the taxpayer nor the second wife was a nonresident alien at any time during 1969 and that she (immediately prior to her death) did not have a taxable year different from that of the taxpayer. On the other hand, if the taxpayer, in 1969, was divorced or legally separated from his second wife, the taxpayer will not qualify as a surviving spouse for 1970 or 1971, since he could not have filed a joint return for 1969 (the year in which his second wife died).

(b) Head of household.

(1) A taxpayer shall be considered the head of a household if, and only if, he is not married at the close of his taxable year, is not a surviving spouse (as defined in paragraph (a) of this section, and

(i) maintains as his home a household which constitutes for such taxable year the principal place of abode, as a member of such household, of at least one of the individuals described in subparagraph (3), or

(ii) maintains (whether or not as his home) a household which constitutes for such taxable year the principal place of abode of one of the individuals described in subparagraph (4).

(2) Under no circumstances shall the same person be used to qualify more than one taxpayer as the head of a household for the same taxable year.

(3) Any of the following persons may qualify the taxpayer as a head of a household:

(i) A son, stepson, daughter, or stepdaughter of the taxpayer, or a descendant of a son or daughter of the taxpayer. For the purpose of determining whether any of the stated relationships exist, a legally adopted child of a person is considered a child of such person by blood. If any such person is not married at the close of the taxable year of the taxpayer, the taxpayer may qualify as the head of a household by reason of such person even though the taxpayer may not claim a deduction for such person under section 151, for example, because the taxpayer does not furnish more than half of the support of such person. However, if any such person is married at the close of the taxable year of the taxpayer, the taxpayer may qualify as the head of a household by reason of such person only if the taxpayer is entitled to a deduction for such person under section 151 and the regulations thereunder. In applying the preceding sentence there shall be disregarded any such person for whom a deduction is allowed under section 151 only by reason of section 152(c) (relating to persons covered by a multiple support agreement).

(ii) Any other person who is a dependent of the taxpayer, if the taxpayer is entitled to a deduction for the taxable year for such person under section 151 and paragraphs (3) through (8) of section 152(a) and the regulations thereunder. Under section 151 the taxpayer may be entitled to a deduction for any of the following persons:

(a) His brother, sister, stepbrother, or stepsister;

(b) His father or mother, or an ancestor of either;

(c) His stepfather or stepmother;

(d) A son or a daughter of his brother or sister;

(e) A brother or sister of his father or mother; or

(f) His son-in-law, daughter-in-law, father-in-law, mother-in-law, brother- in-law, or sister-in-law;

if such person has a gross income of less than the amount determined pursuant to § 1.151-2 applicable to the calendar year in which the taxable year of the taxpayer begins, if the taxpayer supplies more than one-half of the support of such person for such calendar year and if such person does not make a joint return with his spouse for the taxable year beginning in such calendar year. The taxpayer may not be considered to be a head of a household by reason of any person for whom a deduction is allowed under section 151 only by reason of sections 152 (a)(9), 152 (a)(10), or 152(c) (relating to persons not related to the taxpayer, persons receiving institutional care, and persons covered by multiple support agreements).

(4) The father or mother of the taxpayer may qualify the taxpayer as a head of a household, but only if the taxpayer is entitled to a deduction for the taxable year for such father or mother under section 151 (determined without regard to section 152(c)). For example, an unmarried taxpayer who maintains a home for his widowed mother may not qualify as the head of a household by reason of his maintenance of a home for his mother if his mother has gross income equal to or in excess of the amount determined pursuant to § 1.151-2 applicable to the calendar year in which the taxable year of the taxpayer begins, or if he does not furnish more than one-half of the support of his mother for such calendar year. For this purpose, a person who legally adopted the taxpayer is considered the father or mother of the taxpayer.

(5) For the purpose of this paragraph, the status of the taxpayer shall be determined as of the close of the taxpayer's taxable year. A taxpayer shall be considered as not married if at the close of his taxable year he is legally separated from his spouse under a decree of divorce or separate maintenance, or if at any time during the taxable year the spouse to whom the taxpayer is married at the close of his taxable year was a nonresident alien. A taxpayer shall be considered married at the close of his taxable year if his spouse (other than a spouse who is a nonresident alien) dies during such year.

(6) If the taxpayer is a nonresident alien during any part of the taxable year he may not qualify as a head of a household even though he may comply with the other provisions of this paragraph. See the regulations prescribed under section 871 for a definition of nonresident alien.

(c) Household.

(1) In order for a taxpayer to be considered as maintaining a household by reason of any individual described in paragraph (a)(1) or (b)(3) of this section, the household must actually constitute the home of the taxpayer for his taxable year. A physical change in the location of such home will not prevent a taxpayer from qualifying as a head of a household. Such home must also constitute the principal place of abode of at least one of the persons specified in such paragraph (a)(1) or (b)(3) of this section. It is not sufficient that the taxpayer maintain the household without being its occupant. The taxpayer and such other person must occupy the household for the entire taxable year of the taxpayer. However, the fact that such other person is born or dies within the taxable year will not prevent the taxpayer from qualifying as a head of household if the household constitutes the principal place of abode of such other person for the remaining or preceding part of such taxable year. The taxpayer and such other person will be considered as occupying the household for such entire taxable year notwithstanding temporary absences from the household due to special circumstances. A nonpermanent failure to occupy the common abode by reason of illness, education, business, vacation, military service, or a custody agreement under which a child or stepchild is absent for less than 6 months in the taxable year of the taxpayer, shall be considered temporary absence due to special circumstances. Such absence will not prevent the taxpayer from being considered as maintaining a household if

(i) it is reasonable to assume that the taxpayer or such other person will return to the household, and

(ii) the taxpayer continues to maintain such household or a substantially equivalent household in anticipation of such return.

(2) In order for a taxpayer to be considered as maintaining a household by reason of any individual described in paragraph (b)(4) of this section, the household must actually constitute the principal place of abode of the taxpayer's dependent father or mother, or both of them. It is not, however, necessary for the purposes of such subparagraph for the taxpayer also to reside in such place of abode. A physical change in the location of such home will not prevent a taxpayer from qualifying as a head of a household. The father or mother of the taxpayer, however, must occupy the household for the entire taxable year of the taxpayer. They will be considered as occupying the household for such entire year notwithstanding temporary absences from the household due to special circumstances. For example, a nonpermanent failure to occupy the household by reason of illness or vacation shall be considered temporary absence due to special circumstances. Such absence will not prevent the taxpayer from qualifying as the head of a household if

(i) it is reasonable to assume that such person will return to the household, and

(ii) the taxpayer continues to maintain such household or a substantially equivalent household in anticipation of such return. However, the fact that the father or mother of the taxpayer dies within the year will not prevent the taxpayer from qualifying as a head of a household if the household constitutes the principal place of abode of the father or mother for the preceding part of such taxable year.

(d) Cost of maintaining a household. A taxpayer shall be considered as maintaining a household only if he pays more than one-half the cost thereof for his taxable year. The cost of maintaining a household shall be the expenses incurred for the mutual benefit of the occupants thereof by reason of its operation as the principal place of abode of such occupants for such taxable year. The cost of maintaining a household shall not include expenses otherwise incurred. The expenses of maintaining a household include property taxes, mortgage interest, rent, utility charges, upkeep and repairs, property insurance, and food consumed on the premises. Such expenses do not include the cost of clothing, education, medical treatment, vacations, life insurance, and transportation. In addition, the cost of maintaining a household shall not include any amount which represents the value of services rendered in the household by the taxpayer or by a person qualifying the taxpayer as a head of a household or as a surviving spouse.

(e) Certain married individuals living apart. For taxable years beginning after December 31, 1969, an individual who is considered as not married under section 143(b) shall be considered as not married for purposes of determining whether he or she qualifies as a single individual, a married individual, a head of household or a surviving spouse under sections 1 and 2 of the Code.

[T.D. 7117, 36 FR 9398, May 25, 1971]

§ 1.3-1 Application of optional tax.

(a) General rules.

(1) For taxable years ending before January 1, 1970, an individual whose adjusted gross income is less than $5,000 (or a husband and wife filing a joint return whose combined adjusted gross income is less than $5,000) may elect to pay the tax imposed by section 3 in place of the tax imposed by section 1 (a) or (b). For taxable years beginning after December 31, 1969 and before January 1, 1971 an individual whose adjusted gross income is less than $10,000 (or a husband and wife filing a joint return whose combined adjusted gross income is less than $10,000) may elect to pay the tax imposed by section 3 as amended by the Tax Reform Act of 1969 in place of the tax imposed by section 1 (a) or (b). For taxable years beginning after December 31, 1970 an individual whose adjusted gross income is less than $10,000 (or a husband and wife filing a joint return whose combined adjusted gross income is less than $10,000) may elect to pay the tax imposed by section 3 as amended in place of the tax imposed by section 1 as amended. See § 1.4-2 for the manner of making such election. A taxpayer may make such election regardless of the sources from which his income is derived and regardless of whether his income is computed by the cash method or the accrual method. See section 62 and the regulations thereunder for the determination of adjusted gross income. For the purpose of determining whether a taxpayer may elect to pay the tax under section 3, the amount of the adjusted gross income is controlling, without reference to the number of exemptions to which the taxpayer may be entitled. See section 4 and the regulations thereunder for additional rules applicable to section 3.

(2) The following examples illustrate the rule that section 3 applies only if the adjusted gross income is less than $10,000 ($5,000 for taxable years ending before January 1, 1970).

Example 1.

A is employed at a salary of $9,200 for the calendar year 1970. In the course of such employment, he incurred travel expenses of $1,500 for which he was reimbursed during the year. Such items constitute his sole income for 1970. In such case the gross income is $10,700 but the amount of $1,500 is deducted from gross income in the determination of adjusted gross income and thus A's adjusted gross income for 1970 is $9,200. Hence, the adjusted gross income being less than $10,000, he may elect to pay his tax for 1970 under section 3. Similarly, in the case of an individual engaged in trade or business (excluding from the term “engaged in trade or business” the performance of personal services as an employee), there may be deducted from gross income in ascertaining adjusted gross income those expenses directly relating to the carrying on of such trade or business.

Example 2.

If B has, as his only income for 1970, a salary of $11,600 and his spouse has no gross income, then B's adjusted gross income is $11,600 (not $11,600 reduced by exemptions of $1,250) and he is not for such year, entitled to pay his tax under section 3. If, however, B has for 1970 a salary of $13,000 and incident to his employment he incurs expenses in the amount of $3,400 for travel, meals, and lodging while away from home, for which he is not reimbursed, the adjusted gross income is $13,000 minus $3,400 or $9,600. In such case his adjusted gross income being less than $10,000, B may elect to pay the tax under section 3. However, if B's wife has adjusted gross income of $400, the total adjusted gross income is $10,000. In such case, if B and his wife file a joint return, they may not elect to pay the optional tax since the combined adjusted gross income is not less than $10,000. B may nevertheless elect to pay the optional tax, but if he makes this election he must file a separate return and, since his wife has gross income, he may not claim an exemption for her in computing the optional tax.

(b) Surviving spouse. The return of a surviving spouse is treated as a joint return for purposes of section 3. See section 2, and the regulations thereunder, with respect to the qualifications of a taxpayer as a surviving spouse. Accordingly, if the taxpayer qualifies as a surviving spouse and elects to pay the optional tax, he shall use the column in the tax table, appropriate to his number of exemptions, provided for cases in which a joint return is filed.

(c) Use of tax table.

(1) To determine the amount of the tax, the individual ascertains the amount of his adjusted gross income, refers to the appropriate table set forth in section 3 or the regulations thereunder, ascertains the income bracket into which such income falls, and, using the number of exemptions applicable to his case, finds the tax in the vertical column having at the top thereof a number corresponding to the number of exemptions to which the taxpayer is entitled.

(2) Section 3(b) (relating to taxable years beginning after Dec. 31, 1964 and ending before Jan. 1, 1970) contains 5 tables for use in computing the tax. Table I is to be used by a single person who is not a head of household. Table II is to be used by a head of household. Table III is to be used by married persons filing joint returns and by a surviving spouse. Table IV is to be used by married persons filing separate returns using the 10 percent standard deduction. Table V is to be used by married persons filing separate returns using the minimum standard deduction. For an explanation of the standard deduction see section 141 and the regulations thereunder.

(3) 30 tables are provided for use in computing the tax under the Tax Reform Act of 1969. Tables I through XV apply for taxable years beginning after December 31, 1969 and ending before January 1, 1971. Tables XVI through XXX apply for taxable years beginning after December 31, 1970. The standard deduction for Tables I through XV, applicable to taxable years beginning in 1970, is 10 percent. The standard deduction for Tables XVI through XXX, applicable to taxable years beginning in 1971, is 13 percent. For an explanation of the standard deduction and the low income allowance see section 141 as amended by the Tax Reform Act of 1969.

(4) In the case of married persons filing separate returns who qualify to use the optional tax imposed by section 3, such persons shall use the tax imposed by the table for the applicable year in accordance with the rules prescribed by sections 4(c) and 141 and the regulations thereunder governing the use and application of the standard deduction and the low income allowance.

(5) The tax shown in the tax tables set forth in section 3 or the regulations thereunder reflects full income splitting in the case of a joint return (including the return of a surviving spouse) and lesser income splitting in the case of a head of household. Therefore, it is possible for the tax shown in the tables relating to joint returns, or relating to a return of a head of a household, to be lower than that shown in the table for separate returns even though the amounts of adjusted gross income and the number of exemptions are the same.

[T.D. 7117, 36 FR 9420, May 25, 1971]

§ 1.4-1 Number of exemptions.

(a) For the purpose of determining the optional tax imposed under section 3, the taxpayer shall use the number of exemptions allowable to him as deductions under section 151. See sections 151, 152, and 153, and the regulations thereunder. In general, one exemption is allowed for the taxpayer; one exemption for his spouse if a joint return is made, or if a separate return is made by the taxpayer and his spouse has no gross income for the calendar year in which the taxable year of the taxpayer begins and is not the dependent of another taxpayer for such calendar year; and one exemption for each dependent whose gross income for the calendar year in which the taxable year of the taxpayer begins is less than the applicable amount determined pursuant to § 1.151-2. No exemption is allowed for any dependent who has made a joint return with his spouse for the taxable year beginning in the calendar year in which the taxable year of the taxpayer begins. The taxpayer may, in certain cases, be allowed an exemption for a dependent child of the taxpayer notwithstanding the fact that such child has gross income equal to or in excess of the amount determined pursuant to § 1.151-2 applicable to the calendar year in which the taxable year of the taxpayer begins. The requirements for the allowance of such an exemption are set forth in paragraph (c) of § 1.152-1. See paragraphs (c) and (d) of § 1.151-1 with respect to additional exemptions for a taxpayer or spouse who has attained the age 65 years and for a blind taxpayer or blind spouse

(b) The application of this section may be illustrated by the following examples:

Example 1.

A, a married man whose duties as an employee require traveling away from his home, has as his sole gross income a salary of $5,600 for the calendar year 1954. His traveling expenses, including cost of meals and lodging, amount in such year to $750, and hence, his adjusted gross income is $4,850. His wife, B, has as her sole income interest in the amount of $85, and thus the aggregate adjusted gross income of A and B is $4,935. A has two dependent children neither of whom has any income. A and B file a joint return for 1954 on Form 1040. In such case four exemptions are allowable. The adjusted gross income falls within the tax bracket $4,900-4,950. By referring to such tax bracket in the tax table in section 3 and to the column headed “4” therein, the tax is found to be $407.

Example 2.

C, a married man, has as his sole income in 1954 wages of $4,600, and has two dependent children neither of whom has any income. His wife, D, has adjusted gross income of $400. C files a separate return for 1954 and is entitled to claim three exemptions. C's income falls within the tax bracket $4,600-4,650 and hence, with three exemptions his tax is $480. No exemption is allowed with respect to since D has gross income and a joint return was not filed.

Example 3.

D, a married man with no dependents, attains the age of 65 on September 1, 1954. The aggregate adjusted gross income of D and his wife for 1954 is $4,840. D and his wife file a joint return for 1954 and are entitled to three exemptions, one for each taxpayer and one additional exemption for D because of his age. Since the adjusted gross income of D and his wife falls within the tax bracket $4,800-4,850, the tax on a joint return is $509.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960, as amended by T.D. 7114, 36 FR 9018, May 18, 1971]

§ 1.4-2 Elections.

(a) Making of election. The election to pay the optional tax imposed under section 3 shall be made by

(1) filing a return on Form 1040A, or

(2) filing a return on Form 1040 and electing in such return, in accordance with the provisions of section 144 and the regulations thereunder, to take the standard deduction provided by section 141.

(b) Election under section 3 and election of standard deduction. Section 144 (a) and the regulations thereunder provide rules for treating an election to pay the tax under section 3 as an election to take the standard deduction, and for treating an election to take the standard deduction as an election to pay the tax under section 3. For example, if the taxpayer's return shows $5,000 or more of adjusted gross income and he elects to take the standard deduction, he will be deemed to have elected to pay the tax under section 3 if it is subsequently determined that his correct adjusted gross income is less than $5,000.

(c) [Reserved]

(d) Change of election. For rules relating to a change of election to pay, or not to pay, the optional tax imposed under section 3, see section 144 (b) and the regulations thereunder.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960, as amended by T.D. 6581, 26 FR 11677, Dec. 6, 1961; T.D. 7269, 38 FR 9295, Apr. 13, 1973]

§ 1.4-3 Husband and wife filing separate returns.

(a) In general. If the separate adjusted gross income of a husband is less than $5,000 and the separate adjusted gross income of his wife is less than $5,000, and if each is required to file a return, the husband and the wife must each elect to pay the optional tax imposed under section 3 or neither may so elect. If the separate adjusted gross income of each spouse is $5,000 or more, then neither spouse can elect to pay the optional tax imposed under section 3. If the adjusted gross income of one spouse is $5,000 or more and that of the other spouse is less than $5,000, the election to pay the optional tax imposed under section 3 may be exercised by the spouse having adjusted gross income of less than $5,000 only if the spouse having adjusted gross income of $5,000 or more, in computing taxable income, uses the standard deduction provided by section 141. If the spouse having adjusted gross income of $5,000 or more does not use the standard deduction, then the spouse having adjusted gross income of less than $5,000 may not elect to pay the optional tax and must compute taxable income without regard to the standard deduction. Accordingly, if the spouse having adjusted gross income of $5,000 or more itemizes the deductions allowed by sections 161 and 211 in computing taxable income, the spouse having adjusted gross income of less than $5,000 must also compute taxable income by itemizing the deductions allowed by sections 161 and 211, and must pay the tax imposed by section 1. For rules relative to the election to take the standard deduction by husband and wife, see part IV (section 141 and following), subchapter B, chapter 1 of the Code, and the regulations thereunder.

(b) Taxable years beginning after December 31, 1963, and before January 1, 1970.

(1) In the case of a husband and wife filing a separate return for a taxable year beginning after December 31, 1963, and before January 1, 1970, the optional tax imposed by section 3 shall be -

(i) For taxable years beginning in 1964, the lesser of the tax shown in Table IV (relating to the 10-percent standard deduction for married persons filing separate returns) or Table V (relating to the minimum standard deduction for married persons filing separate returns) of section 3(a), and

(ii) For a taxable year beginning after December 31, 1964, and before January 1, 1970, the lesser of the tax shown in Table IV (relating to the 10-percent standard deduction for married persons filing separate returns) or Table V (relating to minimum standard deduction for married persons filing separate returns) of section 3(b).

(2) If the tax of one spouse is determined with regard to the 10-percent standard deduction provided for in Table IV of section 3(a) or 3(b) or if such spouse in computing taxable income uses the 10-percent standard deduction provided for in section 141(b), then the minimum standard deduction provided for in Table V of section 3(a) or 3(b) shall not apply in the case of the other spouse, if such spouse elects to pay the optional tax imposed under section

(3) . Thus, if a husband and wife compute their tax with reference to the standard deduction, one cannot elect to use the 10-percent standard deduction and the other elect to use the minimum standard deduction. However, an individual described in section 141(d)(2) may elect pursuant to such section and the regulations thereunder to pay the tax shown in Table V of section 3(a) or 3(b) in lieu of the tax shown in Table IV of section 3(a) or 3(b). See section 141(d) and the regulations thereunder for rules relating to the standard deduction in the case of married individuals filing separate returns.

(c) Taxable years beginning after December 31, 1969.

(1) In the case of a husband and wife filing a separate return for a taxable year beginning after December 31, 1969, the optional tax imposed by section 3 shall be the lesser of the tax shown in -

(i) The table prescribed under section 3 applicable to such taxable year in the case of married persons filing separate returns which applies the percentage standard deduction, or

(ii) The table prescribed under section 3 applicable to such taxable year in the case of married persons filing separate returns which applies the low income allowance.

(2) If the tax of one spouse is determined by the table described in subparagraph (1)(i) of this paragraph or if such spouse in computing taxable income uses the percentage standard deduction provided for in section 141(b), then the table described in subparagraph (1)(ii) of this paragraph shall not apply in the case of the other spouse, if such other spouse elects to pay the optional tax imposed under section 3. Thus, if a husband and wife compute the tax with reference to the standard deduction, one cannot elect to use the percentage standard deduction and the other elect to use the low income allowance. A married individual described in section 141(d)(2) may elect pursuant to such section and the regulations thereunder to pay the tax shown in the table described by subparagraph (1)(ii) of this paragraph in lieu of the tax shown in the table described by subparagraph (1)(i) of this paragraph. See section 141(d) and the regulations thereunder for rules relating to the standard deduction in the case of married individuals filing separate returns.

(d) Determination of marital status. For the purpose of applying the restrictions upon the right of a married person to elect to pay the tax under section 3,

(1) the determination of marital status is made as of the close of the taxpayer's taxable year or, if his spouse died during such year, as of the date of death;

(2) a person legally separated from his spouse under a decree of divorce or separate maintenance on the last day of his taxable year (or the date of death of his spouse, whichever is applicable) is not considered as married; and

(3) with respect to taxable years beginning after December 31, 1969, a person, although considered as married within the meaning of section 143(a), is considered as not married if he lives apart from his spouse and satisfies the requirements set forth in section 143(b). See section 143 and the regulations thereunder.

[T.D. 6792, 30 FR 529, Jan. 15, 1965, as amended by T.D. 7123, 36 FR 11084, June 9, 1971]

§ 1.4-4 Short taxable year caused by death.

An individual making a return for a period of less than 12 months on account of a change in his accounting period may not elect to pay the optional tax under section 3. However, the fact that the taxable year is less than 12 months does not prevent the determination of the tax for the taxable year under section 3 if the short taxable year results from the death of the taxpayer.

Tax on Corporations
§ 1.11-1 Tax on corporations.

(a) Every corporation, foreign or domestic, is liable to the tax imposed under section 11 except

(1) corporations specifically excepted under such section from such tax;

(2) corporations expressly exempt from all taxation under subtitle A of the Code (see section 501); and

(3) corporations subject to tax under section 511(a). For taxable years beginning after December 31, 1966, foreign corporations engaged in trade or business in the United States shall be taxable under section 11 only on their taxable income which is effectively connected with the conduct of a trade or business in the United States (see section 882(a)(1)). For definition of the terms “corporations,” “domestic,” and “foreign,” see section 7701(a) (3), (4), and (5), respectively. It is immaterial that a domestic corporation, and for taxable years beginning after December 31, 1966, a foreign corporation engaged in trade or business in the United States, which is subject to the tax imposed by section 11 may derive no income from sources within the United States. The tax imposed by section 11 is payable upon the basis of the returns rendered by the corporations liable thereto, except that in some cases a tax is to be paid at the source of the income. See subchapter A (sections 6001 and following), chapter 61 of the Code, and section 1442.

(b) The tax imposed by section 11 consists of a normal tax and a surtax. The normal tax and the surtax are both computed upon the taxable income of the corporation for the taxable year, that is, upon the gross income of the corporation minus the deductions allowed by chapter 1 of the Code. However, the deduction provided in section 242 for partially tax-exempt interest is not allowed in computing the taxable income subject to the surtax.

(c) The normal tax is at the rate of 22 percent and is applied to the taxable income for the taxable year. However, in the case of a taxable year ending after December 31, 1974, and before January 1, 1976, the normal tax is at the rate of 20 percent of so much of the taxable income as does not exceed $25,000 and at the rate of 22 percent of so much of the taxable income as does exceed $25,000 and is applied to the taxable income for the taxable year.

(d) The surtax is at the rate of 26 percent and is upon the taxable income (computed without regard to the deduction, if any, provided in section 242 for partially tax-exempt interest) in excess of $25,000. However, in the case of a taxable year ending after December 31, 1974, and before January 1, 1976, the surtax is upon the taxable income (computed as provided in the preceding sentence) in excess of $50,000. In certain circumstances the exemption from surtax may be disallowed in whole or in part. See sections 269, 1551, 1561, and 1564 and the regulations thereunder. For purposes of sections 244, 247, 804, 907, 922 and §§ 1.51-1 and 1.815-4, when the phrase “the sum of the normal tax rate and the surtax rate for the taxable year” is used in any such section, the normal tax rate for all taxable years beginning after December 31, 1963, and ending before January 1, 1976, shall be considered to be 22 percent.

(e) The computation of the tax on corporations imposed under section 11 may be illustrated by the following example:

Example.

The X Corporation, a domestic corporation, has gross income of $86,000 for the calendar year 1964. The gross income includes interest of $5,000 on United States obligations for which a deduction under section 242 is allowable in determining taxable income subject to the normal tax. It has other deductions of $11,000. The tax of the X Corporation under section 11 for the calendar year is $28,400 ($15,400 normal tax and $13,000 surtax) computed as follows:

Computation of Normal Tax
Gross income $86,000
Deductions:
Partially tax-exempt interest $5,000
Other 11,000 16,000
Taxable income 70,000
Normal tax (22 percent of $70,000) 15,400
Computation of Surtax
Taxable income 70,000
Add: Amount of partially tax-exempt interest deducted in computing taxable income 5,000
Taxable income subject to surtax 75,000
Less: Exemption from surtax 25,000
Excess of taxable income subject to surtax over exemption 50,000
Surtax (26 percent of $50,000) 13,000

(f) For special rules applicable to foreign corporations engaged in trade or business within the United States, see section 882 and the regulations thereunder. For additional tax on personal holding companies, see part II (section 541 and following), subchapter G, chapter 1 of the Code, and the regulations thereunder. For additional tax on corporations improperly accumulating surplus, see part I (section 531 and following), subchapter G, chapter 1 of the Code, and the regulations thereunder. For treatment of China Trade Act corporations, see sections 941 and 942 and the regulations thereunder. For treatment of Western Hemisphere trade corporations, see sections 921 and 922 and the regulations thereunder. For treatment of capital gains and losses, see subchapter P (section 1201 and following), chapter 1 of the Code. For computation of the tax for a taxable year during which a change in the tax rates occurs, see section 21 and the regulations thereunder.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960, as amended by T.D. 7293, 38 FR 32792, Nov. 28, 1973; T.D. 74-13, 41 FR 12639, Mar. 26, 1976]

Changes in Rates During a Taxable Year
§ 1.15-1 Changes in rate during a taxable year.

(a) Section 21 applies to all taxpayers, including individuals and corporations. It provides a general rule applicable in any case where

(1) any rate of tax imposed by chapter 1 of the Code upon the taxpayer is increased or decreased, or any such tax is repealed, and

(2) the taxable year includes the effective date of the change, except where that date is the first day of the taxable year. For example, the normal tax on corporations under section 11(b) was decreased from 30 percent to 22 percent in the case of a taxable year beginning after December 31, 1963. Accordingly, the tax for a taxable year of a corporation beginning on January 1, 1964, would be computed under section 11(b) at the new rate without regard to section 21. However, for any taxable year beginning before January 1, 1964, and ending on or after that date, the tax would be computed under section 21. For additional circumstances under which section 21 is not applicable, see paragraph (k) of this section.

(b) In any case in which section 21 is applicable, a tentative tax shall be computed by applying to the taxable income for the entire taxable year the rate for the period within the taxable year before the effective date of change, and another tentative tax shall be computed by applying to the taxable income for the entire taxable year the rate for the period within the taxable year on or after such effective date. The tax imposed on the taxpayer is the sum of -

(1) An amount which bears the same ratio to the tentative tax computed at the rate applicable to the period within the taxable year before the effective date of the change that the number of days in such period bears to the number of days in the taxable year, and

(2) An amount which bears the same ratio to the tentative tax computed at the rate applicable to the period within the taxable year on and after the effective date of the change that the number of days in such period bears to the number of days in the taxable year.

(c) If the rate of tax is changed for taxable years “beginning after” or “ending after” a certain date, the following day is considered the effective date of the change for purposes of section 21. If the rate is changed for taxable years “beginning on or after” a certain date, that date is considered the effective date of the change for purposes of section 21. This rule may be illustrated by the following examples:

Example 1.

Assume that the law provides that a change in a certain rate of tax shall be effective only with respect to taxable years beginning after December 31, 1969. The effective date of change for purposes of section 21 is January 1, 1970, and section 21 must be applied to any taxable year which begins before and ends on or after January 1, 1970.

Example 2.

Assume that the law provides that a change in a certain rate of tax shall be applicable only with respect to taxable years ending after December 31, 1970. For purposes of section 21, the effective date of change is January 1, 1971, and section 21 must be applied to any taxable year which begins before and ends on or after January 1, 1971.

Example 3.

Assume that the law provides that a change in a certain rate of tax shall be effective only with respect to taxable years beginning on or after January 1, 1971. The effective date of change for purposes of section 21 is January 1, 1971, and section 21 must be applied to any taxable year which begins before and ends on or after January 1, 1971.

(d) If a tax is repealed, the repeal will be treated as a change of rate for purposes of section 21, and the rate for the period after the repeal (for purposes of computing the tentative tax with respect to that period) will be considered zero. For example, the Tax Reform Act of 1969 repealed section 1562, which imposed a 6 percent additional tax on controlled corporations electing multiple surtax exemptions, effective for taxable years beginning after December 31, 1974. For such controlled corporations having taxable years beginning in 1974 and ending in 1975, the rate for the period ending before January 1, 1975, would be 6 percent; the rate for the period beginning after December 31, 1974, would be zero. However, subject to the rules stated in this section, section 21 does not apply to the imposition of a new tax. For example, if a new tax is imposed for taxable years beginning on or after July 1, 1972, a computation under section 21 would not be required with respect to such new tax in the case of taxable years beginning before July 1, 1972, and ending on or after that date. If the effective date of the imposition of a new tax and the effective date of a change in rate of such tax fall in the same taxable year, section 21 is not applicable in computing the taxpayer's liability for such tax for such year unless the new tax is expressly imposed upon the taxpayer for a portion of his taxable year prior to the change in rate.

(e) If a husband and wife have different taxable years because of the death of either spouse, and if a joint return is filed with respect to the taxable year of each, then, for purposes of section 21, the joint return shall be treated as if the taxable years of both spouses ended on the date of the closing of the surviving spouse's taxable year. See section 6013 (c), relating to treatment of joint return after death of either spouse. Accordingly, if a change in the rate of tax is effective during the taxable year of the surviving spouse, the tentative taxes with respect to the joint return shall be computed on the basis of the number of days during which each rate of tax was in effect for the taxable year of the surviving spouse.

(f) Section 21 applies whether or not the taxpayer has a taxable year of less than 12 months. Moreover, section 21 applies whether or not the taxable income for a taxable year of less than 12 months is required to be placed on an annual basis under section 443. If the taxable income is required to be computed under section 443(b) then the tentative taxes under section 21 are computed as provided in paragraph (1) or (2) of section 443(b) and are reduced as provided in those paragraphs. The tentative taxes so computed and reduced are then apportioned as provided in section 21(a)(2) to determine the tax for such taxable year as computed under section 21.

(g) If a taxpayer has made the election under section 441(f) (relating to computation of taxable income on the basis of an annual accounting period varying from 52 to 53 weeks), the rules provided in section 441(f)(2) shall be applicable for purposes of determining whether section 21 applies to the taxable year of the taxpayer. Where a taxpayer has made the election under section 441(f) and where section 21 applies to the taxable year of the taxpayer the computation under section 21(a)(2) shall be made upon the basis of the actual number of days in the taxable year and in each period thereof.

(h)

(1) Section 21 is applicable only if the rate of tax imposed by chapter 1 changes. Sections in which rates of tax are specified or incorporated by reference include the following: 1, 2, 3, 11, 511, 531, 541, 821, 831, 871, 881, 1201, and 1348 (for taxable years beginning after December 31, 1970). Except as provided in subparagraph (3) of this paragraph, section 21 is not applicable with respect to changes in the law relating to deductions from gross income, exclusions from or inclusions in gross income, or other items taken into account in determining the amount or character of income subject to tax. Moreover, section 21 is not applicable with respect to changes in the law relating to credits against the tax or with respect to changes in the law relating to limitations on the amount of tax. Section 21 is applicable, however, to all those computations specified in the section providing the rate of tax which are implicit in determining the rate. For example, if one of the tax brackets in the tax tables under section 3 were to be changed, section 21 would be applicable to that change. Thus, if the bracket relating to “at least $4,200 but not less than $4,250” for heads of households should be changed to increase or decrease the last sum specified, with corresponding changes being made in subsequent brackets, section 21 would be applicable. The enactment of sections 1561 and 1562 is considered a change in section 11(d) which constitutes a change in rate for the period ending after December 31, 1963. The amendment of section 1561 and the repeal of section 1562 by the Tax Reform Act of 1969 is considered a change in section 11(d) which constitutes a change in rate for the period ending after December 31, 1974. The repeal of the 2 percent additional tax imposed under section 1503 on corporations filing consolidated returns constitutes a change in rate for the period ending after December 31, 1963. The addition to the Code of section 1348 (relating to 50 percent maximum rate on earned income) is a change in rate to which section 21(a) is applicable. The amendment of section 11(d) by the Tax Reduction Act of 1975 which increases to $50,000 the surtax exemption for a taxable year ending during 1975 constitutes a change in rate for such portion of the taxable year (if less than the entire taxable year) as follows December 31, 1974. Similarly, the return of the surtax exemption to $25,000 for a taxable year ending during 1976 constitutes a change in rate for such portion of the taxable year (if less than the entire taxable year) as follows December 31, 1975.

(2) Ordinarily, both the old and the new rates are applied to the same amount of taxable income. However, where the rate of tax is itself taken into account in determining taxable income (for example, the special deduction for Western Hemisphere trade corporations under section 922), the taxable income used in determining the tentative tax employing the rate before the effective date of change shall be determined by reference to that rate of tax, and the taxable income for the purpose of determining the tentative tax employing the rate for the period on and after the effective date of the change shall be determined by reference to the new tax rate.

(3) Section 21 is applicable with respect to changes in the law relating to the standard deduction for individuals provided in part IV of subchapter B and to the deduction for personal exemptions for individuals provided in part V of subchapter B.

(i) If the rate of tax changes more than once during the taxable year, section 21 is applicable to each change in rate. For example, if the rate of normal tax changed for taxable years beginning on or after March 1, 1954, and changed again for taxable years beginning on or after June 1, 1954, section 21 requires computation of 3 tentative taxes for any taxable year which began before March 1, 1954, and ended on or after June 1, 1954: One tentative tax at the rate in effect before the March 1 change; another tentative tax at the rate in effect from March 1 to May 31; and a third tentative tax at the rate in effect from June 1 to the end of the taxable year. The proportion of each such tentative tax taken into account in determining the tax imposed on the taxpayer is computed by reference to the portion of the taxable year before March 1, 1954, by reference to the portion of the taxable year from March 1, 1954, through May 31, 1954, and by reference to the portion of the taxable year from June 1, 1954, to the end of the taxable year, respectively.

(j)

(1) If a change in the rate of one tax imposed by chapter 1 of the Code does not affect the amount of other taxes imposed by chapter 1 of the Code the other taxes may be determined without regard to section 21 and section 21 will be applied only to the tax for which a change in rate is made. However, if the change of rate of one tax does affect the amount of other taxes imposed under chapter 1 of the Code, then the computation of the taxes under chapter 1 of the Code so affected shall be made by applying section 21. For example, if section 1201 applies to an individual taxpayer for a taxable year containing the effective date of a change in a rate of tax provided in section 1, then under section 21 the taxpayer must compute a tentative tax for each period for which a different rate of tax is effective under section 1. The tentative tax for each such period as computed under section 1201 will reflect the rate of tax provided by section 1 for such period.

(2) In certain cases chapter 1 of the Code provides that the particular tax to be imposed upon the taxpayer shall be one of several taxes, the basis of selection being the tax that is greater or lesser. See, for example, sections 821 and 1201. If in any such case the rate of any one of these taxes changes, then the tentative taxes computed as provided by section 21 for each period shall be computed employing the tax selected in accordance with the general rule of selection for such a case, at the rate of tax in effect for such period. Thus, if a change in the rate of the alternative tax under section 1201 is such that the alternative tax under section 1201 is applicable if the old rate is used and is not applicable if the new rate is used, one tentative tax will consist of the alternative tax under section 1201 and the other tentative tax will consist of the tax imposed by the other applicable sections of chapter 1 of the Code. The two tentative taxes so computed are then prorated in accordance with section 21(a)(2) and the sum of the proportionate amounts is the tax imposed for the taxable year under chapter 1 of the Code. See the examples in paragraph (n) of this section.

(k) Section 21 does not apply in the following situations:

(1) The provisions of section 21 do not apply to the imposition of the tax surcharge by section 51. The proration rules of section 51(a) apply in the case of a taxable year ending on or after the effective date of the surcharge and beginning before July 1, 1970.

(2) The provisions of section 21 do not apply to the imposition of the minimum tax for tax preferences by section 56. The proration rules of section 301(c) of the Tax Reform Act of 1969 (83 Stat. 586) apply in the case of a taxable year beginning in 1969 and ending in 1970.

(l) In computing the number of days each rate of tax is in effect during the taxable year for purposes of section 21(a)(2), the effective date of the change in rate shall be counted in the period for which the new rate is in effect.

(m) Any credits against tax, and any limitation in any credit against tax, shall be based upon the tax computed under section 21. For credits against tax, see part IV (section 31 and following), subchapter A, chapter 1 of the Code.

(n) The application of section 21 may be illustrated by the following examples: (See also the examples in § 1.1561-2A(a)(3).)

Example 1.

A, a married taxpayer filing a joint return, reports his income on the basis of a fiscal year ending June 30. For his fiscal year ending June 30, 1970, A reports taxable income (exclusive of capital gains and losses) of $50,000 and net long-term capital gain (section 1201 gain (net capital gain for taxable years beginning after December 31, 1976)) of $75,000. The rate of tax on capital gains under section 1201(b) relating to the alternative tax has been increased from 25 percent to a maximum rate of 291/2 percent with respect to gain in excess of $50,000 and the effective date of the change in rate is January 1, 1970. The income tax for the taxable year ended June 30, 1970, would be computed under section 21 as follows:

Tentative Tax
Taxable income exclusive of capital gains and losses $50,000
Long-term capital gain 75,000
125,000
Deduct 50% of long-term capital gain 37,500
Taxable income 87,500
Tax under section 1 (1969 and 1970 rates) 37,690
Alternative Tax Under Section 1201(b) (1969 R ates)
Taxable income ($50,000 + 50% of $75,000) $87,500
Less 50% of long-term capital gain 37,500
Taxable income exclusive of capital gains 50,000
Partial tax (tax on $50,000) 17,060
Plus 25% of $75,000 18,750
Alternative tax under section 1201(b) at 1969 rates 35,810
Alternative Tax Under Section 1201(b) (1970 Rates)
step i
Taxable income ($50,000 + 50% of $75,000) $87,500
Deduct 50% of net section 1201 gain (net capital gain for taxable years beginning after December 31, 1976) 37,500
50,000
Tax on $50,000 (taxable income exclusive of capital gains) $17,060
step ii
(a) Net section 1201 gain (net capital gain for taxable years beginning after December 31, 1976) 75,000
(b) Subsection (d) gain 50,000
25% of $50,000 (lesser of (a) or (b)) 12,500
step iii
(c) 29 1/2% of $25,000 (excess of (a) over (b)) 7,375
(d) Ordinary income $50,000
50% of net section 1201 gain (net capital gain for taxable years beginning after December 31, 1976) 37,500
87,500
Tax on $87,500 $37,690
Ordinary income $50,000
50% of subsection (d) gain 25,000
75,000
Tax on $75,000 30,470
Difference 7,220
Lesser of (c) or (d) $7,220
Alternative tax (total of 3 steps) at rates effective on and after January 1, 1970 36,780

Since the alternative tax is less than the tax imposed under section 1 for both the period in 1969 and the period in 1970, the alternative tax applies for both periods. Thus, since the effective date of the change in the rate of tax on capital gains is January 1, 1970, the old rate of alternative tax is effective for 184 days of the taxable year and the new rate of alternative tax is effective for 181 days of the taxable year. The alternative taxes are apportioned as follows:

1969 - 184/365 of $35,810 $18,052.16
1970 - 181/365 of $36,780 18,238.85
36,291.01
Tax surcharge (See § 1.51-1(d)(1)(i)) 2,729.28
Total tax for the taxable year 39,020.29

Example 2.

B, a single individual not a head of a household, has a taxable year ending March 31. For the taxable year ending March 31, 1971, B has adjusted gross income of $18,500. His computation of the tax imposed is as follows:

1970 Tentative Tax
Adjusted gross income $18,500.00
Less:
Standard deduction $1,000.00
Personal exemption 625.00 1,625.00
Taxable income under 1970 deduction provisions 16,875.00
Tax on $16,875 (1970 rates):
Tax on first $16,000 4,330.00
42 percent of $875 367.50
Tentative tax at rates and deduction provisions effective on or after January 1, 1970 4,697.50
1971 Tentative Tax
Adjusted gross income $18,500.00
Less:
Standard deduction $1,500
Personal exemption 650 2,150.00
Taxable income under 1971 deduction provisions 16,350.00
Tax on $16,350 (1971 rates):
Tax on first $16,000 3,830
34 percent of $350 119
Tentative tax at rates and deduction provisions effective on or after Januray 1, 1971 3,949.00
The 1970 and 1971 tentative taxes are apportioned as follows:
1970 - 275/365 of $4,697.50 3,539.21
1971 - 90/365 of $3,949.00 973.73
4,512.94
Tax surcharge (see § 1.51-1(d)(1)(i)) 56.26
Total tax for the taxable year 4,569.20

Example 3.

H and W, husband and wife, have a foster child, C, who qualifies as a dependent under section 152(b)(2) for the period beginning after December 31, 1969. H and W file a joint return on the basis of a taxable year ending August 31. For the taxable year ending August 31, 1970, H and W have adjusted gross income of $12,500. Their computation of the tax imposed is as follows:

1969 Tentative Tax
Adjusted gross income $12,500.00
Less:
Standard deduction $1,000.00
Personal exemption (2) 1,200.00 2,200.00
Taxable income under 1969 deduction provisions 10,300.00
Taxable income reduced by one-half 5,150.00
Tax on $5,150 (1969 rates):
Tax on first $4,000 $690.00
22 percent of $1,150 253.00 943.00
Twice the tax on $5,150 $1,886.00
Tentative tax at rates and deduction provisions effective on or after January 1, 1969 1,886.00
1970 Tentative Tax
Adjusted gross income $12,500.00
Less:
Standard deduction $1,000.00
Personal exemption (3) 1,875.00 2,875.00
Taxable income under 1970 deduction provisions $9,625.00
Tax on $9,625 (1970 rates):
Tax on first $8,000 $1,380.00
22 percent of $1,625 357.50
Tentative tax at rates and deduction provisions effective on or after January 1, 1970 1,737.50
The 1969 and 1970 tentative taxes are apportioned as follows:
1969 - 122/365 of $1,886 $630.39
1970 - 243/365 of $1,737.50 1,156.75
1,787.14
Tax surcharge (see § 1.51-1(d)(1)(i)) 104.05
Total tax for the taxable year 1,891.19

Example 4.

B, a single individual with one exemption, reports his income on the basis of a fiscal year ending June 30. For fiscal year ending June 30, 1971, B reports adjusted gross income of $250,000, consisting of earned net income of $240,000 and investment income of $10,000. In addition, on April 24, 1971, stock was transferred to B pursuant to his exercise of a qualified stock option, and the fair market value of such stock at that time exceeded the option price by $175,000. This $175,000 constitutes an item of tax preference described in section 57(a)(6). B claims itemized deductions in the amount of $34,000. By reason of section 1348, the maximum rate of tax on earned taxable income for a taxable year beginning after 1970 but before 1972 is 60 percent. The income tax for the taxable year ending June 30, 1971, would be computed under section 21 as follows:

1970 Tentative Tax
Adjusted gross income $250,000.00
Less:
Itemized deductions $34,000.00
Personal exemption 625.00 34,625.00
Taxable income under 1970 deduction provisions 215,375.00
Tax on $215,375 (1970 rates)
Tax on first $100,000 $55,490.00
70 percent of $115,375 80,762.50
Tentative tax at rates and deduction provisions effective on or after January 1, 1970 136,252.50
Minimum tax:
Total tax preference items 175,000.00
Less:
Exemption $30,000.00
Income tax 136,252.50 166,252.50
Subject to 10 percent tax 8,747.50
10 percent tax 874.75
Total tentative tax ($136,252.50 + $874.75) 137,127.25
1971 Tentative Tax
Adjusted gross income $250,000.00
Less:
Itemized deductions $34,000.00
Personal exemption 650.00 34,650.00
Taxable income under 1971 deduction provisions 215,350.00
(a) Tax on highest amount of taxable income on which rate does not exceed 60 percent ($50,000) (1971 rates) 20,190.00
(b) Earned taxable
income:
($215,350 ×
$240,000/
$250,000) $206,736.00
Less: Tax
preference offset:
($175,000
−$30,000) 145,000.00
61,736.00
(c) 60% of the amount by which $61,736 exceeds $50,000 7,041.60
(d) Tax on $215,350 (1971 rates)
Tax on first $100,000 53,090.00
70% of $115,350 80,745.00
Total 133,835.00
(e) Tax on $61,736 (1971 rates)
Tax on first $60,000 26,390.00
64% of $1,736 1,111.04
Total 27,501.04
(f) Excess of $133,835 over $27,501.04 106,333.96
Tentative tax (total of Steps (a), (c), and (f)) at rates and deduction provisions effective on or after January 1, 1971 133,565.56
Minimum tax:
Total tax preference items 175,000.00
Less:
Exemption $30,000.00
Income tax 133,565.56 163,565.56
Subject to 10 percent tax $11,434.44
10 percent tax 1,143.44
Total tentative tax ($133,565.56 + $1,143.44) 134,709.00
The 1970 and 1971 tentative taxes are apportioned as follows:
1970 - 184/365 of $137,127.25 69,127.16
1971 - 181/365 of $134,709 66,800.90
Total tax for the taxable year 135,928.06

Example 5.

The surtax exemption of corporation M (one of 4 subsidiary corporations of W corporation), which files its income tax returns on the basis of a fiscal year ending March 31, 1964, is less than $25,000, by reason of section 1561 of the Code applicable to taxable years ending after December 31, 1963, and beginning before January 1, 1975. The taxable income of corporation M is $100,000, and the amount of the surtax exemption determined under the new rule for the 1964 taxable year is $5,000 ($25,000 ÷ 5). M's income tax liability for the taxable year ending March 31, 1964, is computed as follows:

1963 Tentative Tax
Taxable income $100,000
Normal tax on $100,000 (1963 rates) 30 percent of $100,000 $30,000
Surtax on $75,000 (1963 rates and $25,000 surtax exemption) 22 percent of $75,000 16,500
Total tentative tax at rates and surtax exemption effective before January 1, 1964 46,500
1964 Tentative Tax
Taxable income $100,000
Normal tax on $100,000 (1964 rates) 22 percent of $100,000 $22,000
Surtax on $95,000 (1964 rates and a $5,000 surtax exemption) 28 percent of $95,000 26,600
Total tentative tax at rates and surtax exemption effective after January 1, 1964 48,600
The 1963 and 1964 tentative taxes are apportioned as follows:
1963 - 275/366 of $46,500 34,938.52
1964 - 91/366 of $48,600 12,083.61
Total tax for the taxable year 47,022.13
M has the same amount of taxable income in 1965. Its income tax liability for the fiscal year ending March 31, 1965, is computed as follows:
1964 Tentative Tax
Taxable income $100,000
Normal tax on $100,000 (1964 rates) 22 percent of $100,000 $22,000
Surtax on $95,000 (1964 rates and a $5,000 surtax exemption) 28 percent of $95,000 26,600
Total tentative tax at the 1964 rates 48,600
1965 Tentative Tax
Taxable income $100,000
Normal tax on $100,000 (1965 rates) 22 percent of $100,000 $22,000
Surtax on $95,000 (1965 rates and a $5,000 surtax exemption) 26 percent of $95,000 24,700
Total tentative tax at the 1965 rates 46,700
The 1964 and 1965 tentative taxes are apportioned as follows:
1964 - 275/365 of $48,600 $36,616.44
1965 - 90/365 of $46,700 11,515.07
Total tax for the taxable year 48,131.51

Example 6.

Assume the same facts as in example (5), except that M elected the additional tax under section 1562 for its fiscal year ending March 31, 1964. M's tax liability is completed as follows:

1963 Tentative Tax
Taxable income $100,000
Normal tax on $100,000 (1963 rates) 30 percent of $100,000 $30,000
Surtax on $75,000 (1963 rates and $25,000 surtax exemption) 22 percent of $75,000 16,500
Total tentative tax at rates and surtax exemption effective before January 1, 1964 46,500
1964 Tentative Tax
Taxable income $100,000
Normal tax on $100,000 (1964 rates) 22 percent of $100,000 $22,000
Surtax on $75,000 (1964 rates and $25,000 surtax exemption) 28 percent of $75,000 21,000
Additional tax on $25,000 6 percent of $25,000 1,500
Total tentative tax at rates and surtax exemption effective on and after January 1, 1964 44,500
The 1963 and 1964 tentative taxes are apportioned as follows:
1963 - 275/366 of $46,500 $34,938.52
1964 - 91/366 of $44,500 11,064.21
Total tax for the taxable year 46,002.73

Example 7.

Corporation N files its income tax returns on the basis of a fiscal year ending June 30. For its taxable year ending in 1976, the taxable income of N is $100,000. N's income tax liability is determined for the period July 1, 1975, through December 31, 1975, by taking into account two rates of normal tax under section 11(b)(2) (A) and (B) and the increase to $50,000 in the surtax exemption under section 11(d). For the period January 1, 1976, through June 30, 1976, N's income tax liability is determined by taking into account the single normal tax rate under section 11(b)(1) and the $25,000 surtax exemption under section 11(d). N's tax liability for the taxable year ending June 30, 1976, is computed as follows:

1975 Tentative Tax
Taxable income $100,000
Normal tax on $100,000 (1975 rates) 20 percent of $25,000 $5,000
22 percent of $75,000 16,500
Surtax on $50,000 (1975 rates and $50,000 surtax exemption) 26 percent of $50,000 13,000
Total tentative tax at rates and surtax exemption effective on and after January 1, 1975 34,500
1976 Tentative Tax
Taxable income $100,000
Normal tax on $100,000 (1976 rates) 22 percent of $100,000 $22,000
Surtax on $75,000 (1976 rates and $25,000 surtax exemption) 26 percent of $75,000 19,500
Total tentative tax at rates and surtax exemption effective on and after January 1, 1976 41,500
The 1975 and 1976 tentative taxes are apportioned as follows:
1975 - 184/366 of $34,500 $17,344
1976 - 182/366 of $41,500 20,637
Total tax for the taxable year 37,981

[T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7164, 37 FR 4190, Feb. 29, 1972; T.D. 74-13, 41 FR 12639, Mar. 26, 1976; T.D. 7528, 42 FR 64694, Dec. 28, 1977; T.D. 7728, 45 FR 72651, Nov. 3, 1980. Redesignated by T.D. 9354, 72 FR 45341, Aug. 14, 2007]

§ 1.21-1 Expenses for household and dependent care services necessary for gainful employment.

(a) In general.

(1) Section 21 allows a credit to a taxpayer against the tax imposed by chapter 1 for employment-related expenses for household services and care (as defined in paragraph (d) of this section) of a qualifying individual (as defined in paragraph (b) of this section). The purpose of the expenses must be to enable the taxpayer to be gainfully employed (as defined in paragraph (c) of this section). For taxable years beginning after December 31, 2004, a qualifying individual must have the same principal place of abode (as defined in paragraph (g) of this section) as the taxpayer for more than one-half of the taxable year. For taxable years beginning before January 1, 2005, the taxpayer must maintain a household (as defined in paragraph (h) of this section) that includes one or more qualifying individuals.

(2) The amount of the credit is equal to the applicable percentage of the employment-related expenses that may be taken into account by the taxpayer during the taxable year (but subject to the limits prescribed in § 1.21-2). Applicable percentage means 35 percent reduced by 1 percentage point for each $2,000 (or fraction thereof) by which the taxpayer's adjusted gross income for the taxable year exceeds $15,000, but not less than 20 percent. For example, if a taxpayer's adjusted gross income is $31,850, the applicable percentage is 26 percent.

(3) Expenses may be taken as a credit under section 21, regardless of the taxpayer's method of accounting, only in the taxable year the services are performed or the taxable year the expenses are paid, whichever is later.

(4) The requirements of section 21 and §§ 1.21-1 through 1.21-4 are applied at the time the services are performed, regardless of when the expenses are paid.

(5) Examples. The provisions of this paragraph (a) are illustrated by the following examples.

Example 1.

In December 2007, B pays for the care of her child for January 2008. Under paragraph (a)(3) of this section, B may claim the credit in 2008, the later of the years in which the expenses are paid and the services are performed.

Example 2.

The facts are the same as in Example 1, except that B's child turns 13 on February 1, 2008, and B pays for the care provided in January 2008 on February 3, 2008. Under paragraph (a)(4) of this section, the determination of whether the expenses are employment-related expenses is made when the services are performed. Assuming other requirements are met, the amount B pays will be an employment-related expense under section 21, because B's child is a qualifying individual when the services are performed, even though the child is not a qualifying individual when B pays the expenses.

(b) Qualifying individual -

(1) In general. For taxable years beginning after December 31, 2004, a qualifying individual is -

(i) The taxpayer's dependent (who is a qualifying child within the meaning of section 152) who has not attained age 13;

(ii) The taxpayer's dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B)) who is physically or mentally incapable of self-care and who has the same principal place of abode as the taxpayer for more than one-half of the taxable year; or

(iii) The taxpayer's spouse who is physically or mentally incapable of self-care and who has the same principal place of abode as the taxpayer for more than one-half of the taxable year.

(2) Taxable years beginning before January 1, 2005. For taxable years beginning before January 1, 2005, a qualifying individual is -

(i) The taxpayer's dependent for whom the taxpayer is entitled to a deduction for a personal exemption under section 151(c) and who is under age 13;

(ii) The taxpayer's dependent who is physically or mentally incapable of self-care; or

(iii) The taxpayer's spouse who is physically or mentally incapable of self-care.

(3) Qualification on a daily basis. The status of an individual as a qualifying individual is determined on a daily basis. An individual is not a qualifying individual on the day the status terminates.

(4) Physical or mental incapacity. An individual is physically or mentally incapable of self-care if, as a result of a physical or mental defect, the individual is incapable of caring for the individual's hygiene or nutritional needs, or requires full-time attention of another person for the individual's own safety or the safety of others. The inability of an individual to engage in any substantial gainful activity or to perform the normal household functions of a homemaker or care for minor children by reason of a physical or mental condition does not of itself establish that the individual is physically or mentally incapable of self-care.

(5) Special test for divorced or separated parents or parents living apart -

(i) Scope. This paragraph (b)(5) applies to a child (as defined in section 152(f)(1) for taxable years beginning after December 31, 2004, and in section 151(c)(3) for taxable years beginning before January 1, 2005) who -

(A) Is under age 13 or is physically or mentally incapable of self-care;

(B) Receives over one-half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or live apart at all times during the last 6 months of the calendar year; and

(C) Is in the custody of one or both parents for more than one-half of the calendar year.

(ii) Custodial parent allowed the credit. A child to whom this paragraph (b)(5) applies is the qualifying individual of only one parent in any taxable year and is the qualifying child of the custodial parent even if the noncustodial parent may claim the dependency exemption for that child for that taxable year. See section 21(e)(5). The custodial parent is the parent having custody for the greater portion of the calendar year. See section 152(e)(4)(A).

(6) Example. The provisions of this paragraph (b) are illustrated by the following examples.

Example.

C pays $420 for the care of her child, a qualifying individual, to be provided from January 2 through January 31, 2008 (21 days of care). On January 20, 2008, C's child turns 13 years old. Under paragraph (b)(3) of this section, C's child is a qualifying individual from January 2 through January 19, 2008 (13 days of care). C may take into account $260, the pro rata amount C pays for the care of her child for 13 days, under section 21. See § 1.21-2(a)(4).

(c) Gainful employment -

(1) In general. Expenses are employment-related expenses only if they are for the purpose of enabling the taxpayer to be gainfully employed. The expenses must be for the care of a qualifying individual or household services performed during periods in which the taxpayer is gainfully employed or is in active search of gainful employment. Employment may consist of service within or outside the taxpayer's home and includes self-employment. An expense is not employment-related merely because it is paid or incurred while the taxpayer is gainfully employed. The purpose of the expense must be to enable the taxpayer to be gainfully employed. Whether the purpose of an expense is to enable the taxpayer to be gainfully employed depends on the facts and circumstances of the particular case. Work as a volunteer or for a nominal consideration is not gainful employment.

(2) Determination of period of employment on a daily basis -

(i) In general. Expenses paid for a period during only part of which the taxpayer is gainfully employed or in active search of gainful employment must be allocated on a daily basis.

(ii) Exception for short, temporary absences. A taxpayer who is gainfully employed is not required to allocate expenses during a short, temporary absence from work, such as for vacation or minor illness, provided that the care-giving arrangement requires the taxpayer to pay for care during the absence. An absence of 2 consecutive calendar weeks is a short, temporary absence. Whether an absence longer than 2 consecutive calendar weeks is a short, temporary absence is determined based on all the facts and circumstances.

(iii) Part-time employment. A taxpayer who is employed part-time generally must allocate expenses for dependent care between days worked and days not worked. However, if a taxpayer employed part-time is required to pay for dependent care on a periodic basis (such as weekly or monthly) that includes both days worked and days not worked, the taxpayer is not required to allocate the expenses. A day on which the taxpayer works at least 1 hour is a day of work.

(3) Examples. The provisions of this paragraph (c) are illustrated by the following examples:

Example 1.

D works during the day and her husband, E, works at night and sleeps during the day. D and E pay for care for a qualifying individual during the hours when D is working and E is sleeping. Under paragraph (c)(1) of this section, the amount paid by D and E for care may be for the purpose of allowing D and E to be gainfully employed and may be an employment-related expense under section 21.

Example 2.

F works at night and pays for care for a qualifying individual during the hours when F is working. Under paragraph (c)(1) of this section, the amount paid by F for care may be for the purpose of allowing F to be gainfully employed and may be an employment-related expense under section 21.

Example 3.

G, the custodial parent of two children who are qualifying individuals, hires a housekeeper for a monthly salary to care for the children while G is gainfully employed. G becomes ill and as a result is absent from work for 4 months. G continues to pay the housekeeper to care for the children while G is absent from work. During this 4-month period, G performs no employment services, but receives payments under her employer's wage continuation plan. Although G may be considered to be gainfully employed during her absence from work, the absence is not a short, temporary absence within the meaning of paragraph (c)(2)(ii) of this section, and her payments for household and dependent care services during the period of illness are not for the purpose of enabling her to be gainfully employed. G's expenses are not employment-related expenses, and she may not take the expenses into account under section 21.

Example 4.

To be gainfully employed, H sends his child to a dependent care center that complies with all state and local requirements. The dependent care center requires payment for days when a child is absent from the center. H takes 8 days off from work as vacation days. Because the absence is less than 2 consecutive calendar weeks, under paragraph (c)(2)(ii) of this section, H's absence is a short, temporary absence. H is not required to allocate expenses between days worked and days not worked. The entire fee for the period that includes the 8 vacation days may be an employment-related expense under section 21.

Example 5.

J works 3 days per week and her child attends a dependent care center (that complies with all state and local requirements) to enable her to be gainfully employed. The dependent care center allows payment for any 3 days per week for $150 or 5 days per week for $250. J enrolls her child for 5 days per week, and her child attends the care center for 5 days per week. Under paragraph (c)(2)(iii) of this section, J must allocate her expenses for dependent care between days worked and days not worked. Three-fifths of the $250, or $150 per week, may be an employment-related expense under section 21.

Example 6.

The facts are the same as in Example 5, except that the dependent care center does not offer a 3-day option. The entire $250 weekly fee may be an employment-related expense under section 21.

(d) Care of qualifying individual and household services -

(1) In general. To qualify for the dependent care credit, expenses must be for the care of a qualifying individual. Expenses are for the care of a qualifying individual if the primary function is to assure the individual's well-being and protection. Not all expenses relating to a qualifying individual are for the individual's care. Amounts paid for food, lodging, clothing, or education are not for the care of a qualifying individual. If, however, the care is provided in such a manner that the expenses cover other goods or services that are incidental to and inseparably a part of the care, the full amount is for care.

(2) Allocation of expenses. If an expense is partly for household services or for the care of a qualifying individual and partly for other goods or services, a reasonable allocation must be made. Only so much of the expense that is allocable to the household services or care of a qualifying individual is an employment-related expense. An allocation must be made if a housekeeper or other domestic employee performs household duties and cares for the qualifying children of the taxpayer and also performs other services for the taxpayer. No allocation is required, however, if the expense for the other purpose is minimal or insignificant or if an expense is partly attributable to the care of a qualifying individual and partly to household services.

(3) Household services. Expenses for household services may be employment-related expenses if the services are performed in connection with the care of a qualifying individual. The household services must be the performance in and about the taxpayer's home of ordinary and usual services necessary to the maintenance of the household and attributable to the care of the qualifying individual. Services of a housekeeper are household services within the meaning of this paragraph (d)(3) if the services are provided, at least in part, to the qualifying individual. Such services as are performed by chauffeurs, bartenders, or gardeners are not household services.

(4) Manner of providing care. The manner of providing care need not be the least expensive alternative available to the taxpayer. The cost of a paid caregiver may be an expense for the care of a qualifying individual even if another caregiver is available at no cost.

(5) School or similar program. Expenses for a child in nursery school, pre-school, or similar programs for children below the level of kindergarten are for the care of a qualifying individual and may be employment-related expenses. Expenses for a child in kindergarten or a higher grade are not for the care of a qualifying individual. However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be for the care of a qualifying individual.

(6) Overnight camps. Expenses for overnight camps are not employment-related expenses.

(7) Day camps.

(i) The cost of a day camp or similar program may be for the care of a qualifying individual and an employment-related expense, without allocation under paragraph (d)(2) of this section, even if the day camp specializes in a particular activity. Summer school and tutoring programs are not for the care of a qualifying individual and the costs are not employment-related expenses.

(ii) A day camp that meets the definition of dependent care center in section 21(b)(2)(D) and paragraph (e)(2) of this section must comply with the requirements of section 21(b)(2)(C) and paragraph (e)(2) of this section.

(8) Transportation. The cost of transportation by a dependent care provider of a qualifying individual to or from a place where care of that qualifying individual is provided may be for the care of the qualifying individual. The cost of transportation not provided by a dependent care provider is not for the care of the qualifying individual.

(9) Employment taxes. Taxes under sections 3111 (relating to the Federal Insurance Contributions Act) and 3301 (relating to the Federal Unemployment Tax Act) and similar state payroll taxes are employment-related expenses if paid in respect of wages that are employment-related expenses.

(10) Room and board. The additional cost of providing room and board for a caregiver over usual household expenditures may be an employment-related expense.

(11) Indirect expenses. Expenses that relate to, but are not directly for, the care of a qualifying individual, such as application fees, agency fees, and deposits, may be for the care of a qualifying individual and may be employment-related expenses if the taxpayer is required to pay the expenses to obtain the related care. However, forfeited deposits and other payments are not for the care of a qualifying individual if care is not provided.

(12) Examples. The provisions of this paragraph (d) are illustrated by the following examples:

Example 1.

To be gainfully employed, K sends his 3-year old child to a pre-school. The pre-school provides lunch and snacks. Under paragraph (d)(1) of this section, K is not required to allocate expenses between care and the lunch and snacks, because the lunch and snacks are incidental to and inseparably a part of the care. Therefore, K may treat the full amount paid to the pre-school as for the care of his child.

Example 2.

L, a member of the armed forces, is ordered to a combat zone. To be able to comply with the orders, L places her 10-year old child in boarding school. The school provides education, meals, and housing to L's child in addition to care. Under paragraph (d)(2) of this section, L must allocate the cost of the boarding school between expenses for care and expenses for education and other services not constituting care. Only the part of the cost of the boarding school that is for the care of L's child is an employment-related expense under section 21.

Example 3.

To be gainfully employed, M employs a full-time housekeeper to care for M's two children, aged 9 and 13 years. The housekeeper regularly performs household services of cleaning and cooking and drives M to and from M's place of employment, a trip of 15 minutes each way. Under paragraph (d)(3) of this section, the chauffeur services are not household services. M is not required to allocate a portion of the expense of the housekeeper to the chauffeur services under paragraph (d)(2) of this section, however, because the chauffeur services are minimal and insignificant. Further, no allocation under paragraph (d)(2) of this section is required to determine the portion of the expenses attributable to the care of the 13-year old child (not a qualifying individual) because the household expenses are in part attributable to the care of the 9-year-old child. Accordingly, the entire expense of employing the housekeeper is an employment-related expense. The amount that M may take into account as an employment-related expense under section 21, however, is limited to the amount allowable for one qualifying individual.

Example 4.

To be gainfully employed, N sends her 9-year-old child to a summer day camp that offers computer activities and recreational activities such as swimming and arts and crafts. Under paragraph (d)(7)(i) of this section, the full cost of the summer day camp may be for care.

Example 5.

To be gainfully employed, O sends her 9-year-old child to a math tutoring program for two hours per day during the summer. Under paragraph (d)(7)(i) of this section, the cost of the tutoring program is not for care.

Example 6.

To be gainfully employed, P hires a full-time housekeeper to care for her 8-year old child. In order to accommodate the housekeeper, P moves from a 2-bedroom apartment to a 3-bedroom apartment that otherwise is comparable to the 2-bedroom apartment. Under paragraph (d)(10) of this section, the additional cost to rent the 3-bedroom apartment over the cost of the 2-bedroom apartment and any additional utilities attributable to the housekeeper's residence in the household may be employment-related expenses under section 21.

Example 7.

Q pays a fee to an agency to obtain the services of an au pair to care for Q's children, qualifying individuals, to enable Q to be gainfully employed. An au pair from the agency subsequently provides care for Q's children. Under paragraph (d)(11) of this section, the fee may be an employment-related expense.

Example 8.

R places a deposit with a pre-school to reserve a place for her child. R sends the child to a different pre-school and forfeits the deposit. Under paragraph (d)(11) of this section, the forfeited deposit is not an employment-related expense.

(e) Services outside the taxpayer's household -

(1) In general. The credit is allowable for expenses for services performed outside the taxpayer's household only if the care is for one or more qualifying individuals who are described in this section at -

(i) Paragraph (b)(1)(i) or (b)(2)(i); or

(ii) Paragraph (b)(1)(ii), (b)(2)(ii), (b)(1)(iii), or (b)(2)(iii) and regularly spend at least 8 hours each day in the taxpayer's household.

(2) Dependent care centers -

(i) In general. The credit is allowable for services performed by a dependent care center only if -

(A) The center complies with all applicable laws and regulations, if any, of a state or local government, such as state or local licensing requirements and building and fire code regulations; and

(B) The requirements provided in this paragraph (e) are met.

(ii) Definition. The term dependent care center means any facility that provides full-time or part-time care for more than six individuals (other than individuals who reside at the facility) on a regular basis during the taxpayer's taxable year, and receives a fee, payment, or grant for providing services for the individuals (regardless of whether the facility is operated for profit). For purposes of the preceding sentence, a facility is presumed to provide full-time or part-time care for six or fewer individuals on a regular basis during the taxpayer's taxable year if the facility has six or fewer individuals (including the taxpayer's qualifying individual) enrolled for full-time or part-time care on the day the qualifying individual is enrolled in the facility (or on the first day of the taxable year the qualifying individual attends the facility if the qualifying individual was enrolled in the facility in the preceding taxable year) unless the Internal Revenue Service demonstrates that the facility provides full-time or part-time care for more than six individuals on a regular basis during the taxpayer's taxable year.

(f) Reimbursed expenses. Employment-related expenses for which the taxpayer is reimbursed (for example, under a dependent care assistance program) may not be taken into account for purposes of the credit.

(g) Principal place of abode. For purposes of this section, the term principal place of abode has the same meaning as in section 152.

(h) Maintenance of a household -

(1) In general. For taxable years beginning before January 1, 2005, the credit is available only to a taxpayer who maintains a household that includes one or more qualifying individuals. A taxpayer maintains a household for the taxable year (or lesser period) only if the taxpayer (and spouse, if applicable) occupies the household and furnishes over one-half of the cost for the taxable year (or lesser period) of maintaining the household. The household must be the principal place of abode for the taxable year of the taxpayer and the qualifying individual or individuals.

(2) Cost of maintaining a household.

(i) Except as provided in paragraph (h)(2)(ii) of this section, for purposes of this section, the term cost of maintaining a household has the same meaning as in § 1.2-2(d) without regard to the last sentence thereof.

(ii) The cost of maintaining a household does not include the value of services performed in the household by the taxpayer or by a qualifying individual described in paragraph (b) of this section or any expense paid or reimbursed by another person.

(3) Monthly proration of annual costs. In determining the cost of maintaining a household for a period of less than a taxable year, the cost for the entire taxable year must be prorated on the basis of the number of calendar months within that period. A period of less than a calendar month is treated as a full calendar month.

(4) Two or more families. If two or more families occupy living quarters in common, each of the families is treated as maintaining a separate household. A taxpayer is maintaining a household if the taxpayer provides more than one-half of the cost of maintaining the separate household. For example, if two unrelated taxpayers with their respective children occupy living quarters in common and each taxpayer pays more than one-half of the household costs for each respective family, each taxpayer is treated as maintaining a household.

(i) Reserved.

(j) Expenses qualifying as medical expenses -

(1) In general. A taxpayer may not take an amount into account as both an employment-related expense under section 21 and an expense for medical care under section 213.

(2) Examples. The provisions of this paragraph (j) are illustrated by the following examples:

Example 1.

S has $6,500 of employment-related expenses for the care of his child who is physically incapable of self-care. The expenses are for services performed in S's household that also qualify as expenses for medical care under section 213. Of the total expenses, S may take into account $3,000 under section 21. S may deduct the balance of the expenses, or $3,500, as expenses for medical care under section 213 to the extent the expenses exceed 7.5 percent of S's adjusted gross income.

Example 2.

The facts are the same as in Example 1, however, S first takes into account the $6,500 of expenses under section 213. S deducts $500 as an expense for medical care, which is the amount by which the expenses exceed 7.5 percent of his adjusted gross income. S may not take into account the $6,000 balance as employment-related expenses under section 21, because he has taken the full amount of the expenses into account in computing the amount deductible under section 213.

(k) Substantiation. A taxpayer claiming a credit for employment-related expenses must maintain adequate records or other sufficient evidence to substantiate the expenses in accordance with section 6001 and the regulations thereunder.

(l) Effective/applicability date. This section and §§ 1.21-2 through 1.21-4 apply to taxable years ending after August 14, 2007.

[T.D. 9354, 72 FR 45341, Aug. 14, 2007]

§ 1.21-2 Limitations on amount creditable.

(a) Annual dollar limitation.

(1) The amount of employment-related expenses that may be taken into account under § 1.21-1(a) for any taxable year cannot exceed -

(i) $2,400 ($3,000 for taxable years beginning after December 31, 2002, and before January 1, 2011) if there is one qualifying individual with respect to the taxpayer at any time during the taxable year; or

(ii) $4,800 ($6,000 for taxable years beginning after December 31, 2002, and before January 1, 2011) if there are two or more qualifying individuals with respect to the taxpayer at any time during the taxable year.

(2) The amount determined under paragraph (a)(1) of this section is reduced by the aggregate amount excludable from gross income under section 129 for the taxable year.

(3) A taxpayer may take into account the total amount of employment-related expenses that do not exceed the annual dollar limitation although the amount of employment-related expenses attributable to one qualifying individual is disproportionate to the total employment-related expenses. For example, a taxpayer with expenses in 2007 of $4,000 for one qualifying individual and $1,500 for a second qualifying individual may take into account the full $5,500.

(4) A taxpayer is not required to prorate the annual dollar limitation if a qualifying individual ceases to qualify (for example, by turning age 13) during the taxable year. However, the taxpayer may take into account only amounts that qualify as employment-related expenses before the disqualifying event. See also § 1.21-1(b)(6).

(b) Earned income limitation -

(1) In general. The amount of employment-related expenses that may be taken into account under section 21 for any taxable year cannot exceed -

(i) For a taxpayer who is not married at the close of the taxable year, the taxpayer's earned income for the taxable year; or

(ii) For a taxpayer who is married at the close of the taxable year, the lesser of the taxpayer's earned income or the earned income of the taxpayer's spouse for the taxable year.

(2) Determination of spouse. For purposes of this paragraph (b), a taxpayer must take into account only the earned income of a spouse to whom the taxpayer is married at the close of the taxable year. The spouse's earned income for the entire taxable year is taken into account, however, even though the taxpayer and the spouse were married for only part of the taxable year. The taxpayer is not required to take into account the earned income of a spouse who died or was divorced or separated from the taxpayer during the taxable year. See § 1.21-3(b) for rules providing that certain married taxpayers legally separated or living apart are treated as not married.

(3) Definition of earned income. For purposes of this section, the term earned income has the same meaning as in section 32(c)(2) and the regulations thereunder.

(4) Attribution of earned income to student or incapacitated spouse.

(i) For purposes of this section, a spouse is deemed, for each month during which the spouse is a full-time student or is a qualifying individual described in § 1.21-1(b)(1)(iii) or (b)(2)(iii), to be gainfully employed and to have earned income of not less than -

(A) $200 ($250 for taxable years beginning after December 31, 2002, and before January 1, 2011) if there is one qualifying individual with respect to the taxpayer at any time during the taxable year; or

(B) $400 ($500 for taxable years beginning after December 31, 2002, and before January 1, 2011) if there are two or more qualifying individuals with respect to the taxpayer at any time during the taxable year.

(ii) For purposes of this paragraph (b)(4), a full-time student is an individual who, during each of 5 calendar months of the taxpayer's taxable year, is enrolled as a student for the number of course hours considered to be a full-time course of study at an educational organization as defined in section 170(b)(1)(A)(ii). The enrollment for 5 calendar months need not be consecutive.

(iii) Earned income may be attributed under this paragraph (b)(4), in the case of any husband and wife, to only one spouse in any month.

(c) Examples. The provisions of this section are illustrated by the following examples:

Example 1.

In 2007, T, who is married to U, pays employment-related expenses of $5,000 for the care of one qualifying individual. T's earned income for the taxable year is $40,000 and her husband's earned income is $2,000. T did not exclude any dependent care assistance under section 129. Under paragraph (b)(1) of this section, T may take into account under section 21 only the amount of employment-related expenses that does not exceed the lesser of her earned income or the earned income of U, or $2,000.

Example 2.

The facts are the same as in Example 1 except that U is a full-time student at an educational organization within the meaning of section 170(b)(1)(A)(ii) for 9 months of the taxable year and has no earned income. Under paragraph (b)(4) of this section, U is deemed to have earned income of $2,250. T may take into account $2,250 of employment-related expenses under section 21.

Example 3.

For all of 2007, V is a full-time student and W, V's husband, is an individual who is incapable of self-care (as defined in § 1.21-1(b)(1)(iii)). V and W have no earned income and pay expenses of $5,000 for W's care. Under paragraph (b)(4) of this section, either V or W may be deemed to have $3,000 of earned income. However, earned income may be attributed to only one spouse under paragraph (b)(4)(iii) of this section. Under the limitation in paragraph (b)(1)(ii) of this section, the lesser of V's and W's earned income is zero. V and W may not take the expenses into account under section 21.

(d) Cross-reference. For an additional limitation on the credit under section 21, see section 26.

[T.D. 9354, 72 FR 45341, Aug. 14, 2007]

§ 1.21-3 Special rules applicable to married taxpayers.

(a) Joint return requirement. No credit is allowed under section 21 for taxpayers who are married (within the meaning of section 7703 and the regulations thereunder) at the close of the taxable year unless the taxpayer and spouse file a joint return for the taxable year. See section 6013 and the regulations thereunder relating to joint returns of income tax by husband and wife.

(b) Taxpayers treated as not married. The requirements of paragraph (a) of this section do not apply to a taxpayer who is legally separated under a decree of divorce or separate maintenance or who is treated as not married under section 7703(b) and the regulations thereunder (relating to certain married taxpayers living apart). A taxpayer who is treated as not married under this paragraph (b) is not required to take into account the earned income of the taxpayer's spouse for purposes of applying the earned income limitation on the amount of employment-related expenses under § 1.21-2(b).

(c) Death of married taxpayer. If a married taxpayer dies during the taxable year and the survivor may make a joint return with respect to the deceased spouse under section 6013(a)(3), the credit is allowed for the year only if a joint return is made. If, however, the surviving spouse remarries before the end of the taxable year in which the deceased spouse dies, a credit may be allowed on the decedent spouse(s separate return.

[T.D. 9354, 72 FR 45341, Aug. 14, 2007]

§ 1.21-4 Payments to certain related individuals.

(a) In general. A credit is not allowed under section 21 for any amount paid by the taxpayer to an individual -

(1) For whom a deduction under section 151(c) (relating to deductions for personal exemptions for dependents) is allowable either to the taxpayer or the taxpayer's spouse for the taxable year;

(2) Who is a child of the taxpayer (within the meaning of section 152(f)(1) for taxable years beginning after December 31, 2004, and section 151(c)(3) for taxable years beginning before January 1, 2005) and is under age 19 at the close of the taxable year;

(3) Who is the spouse of the taxpayer at any time during the taxable year; or

(4) Who is the parent of the taxpayer's child who is a qualifying individual described in § 1.21-1(b)(1)(i) or (b)(2)(i).

(b) Payments to partnerships or other entities. In general, paragraph (a) of this section does not apply to services performed by partnerships or other entities. If, however, the partnership or other entity is established or maintained primarily to avoid the application of paragraph (a) of this section to permit the taxpayer to claim the credit, for purposes of section 21, the payments of employment-related expenses are treated as made directly to each partner or owner in proportion to that partner's or owner's ownership interest. Whether a partnership or other entity is established or maintained to avoid the application of paragraph (a) of this section is determined based on the facts and circumstances, including whether the partnership or other entity is established for the primary purpose of caring for the taxpayer's qualifying individual or providing household services to the taxpayer.

(c) Examples. The provisions of this section are illustrated by the following examples:

Example 1.

During 2007, X pays $5,000 to her mother for the care of X's 5-year old child who is a qualifying individual. The expenses otherwise qualify as employment-related expenses. X's mother is not her dependent. X may take into account under section 21 the amounts paid to her mother for the care of X's child.

Example 2.

Y is divorced and has custody of his 5-year old child, who is a qualifying individual. Y pays $6,000 during 2007 to Z, who is his ex-wife and the child's mother, for the care of the child. The expenses otherwise qualify as employment-related expenses. Under paragraph (a)(4) of this section, Y may not take into account under section 21 the amounts paid to Z because Z is the child's mother.

Example 3.

The facts are the same as in Example 2, except that Z is not the mother of Y's child. Y may take into account under section 21 the amounts paid to Z.

[T.D. 9354, 72 FR 45341, Aug. 14, 2007]

§ 1.24-1 Partial credit allowed for certain other dependents.

(a) In general. For purposes of section 24(h)(4)(A), a taxpayer may be eligible to increase the credit determined under section 24(a) by $500 for a dependent of the taxpayer, as defined in section 152, other than a qualifying child described in section 24(c).

(b) Applicability date. This section applies to taxable years beginning on or after October 13, 2020.

[T.D. 9913, 85 FR 64385, Oct. 13, 2020]

§ 1.25-1T Credit for interest paid on certain home mortgages (Temporary).

(a) In general. Section 25 permits States and political subdivisions to elect to issue mortgage credit certificates in lieu of qualified mortgage bonds. An individual who holds a qualified mortgage credit certificate (as defined in § 1.25-3T) is entitled to a credit against his Federal income taxes. The amount of the credit depends upon

(1) the amount of mortgage interest paid or accrued during the year and

(2) the applicable certificate credit rate. See § 1.25-2T. The amount of the deduction under section 163 for interest paid or accrued during any taxable year is reduced by the amount of the credit allowable under section 25 for such year. See § 1.163-6T. The holder of a qualified mortgage credit certificate may be entitled to additional withholding allowances. See section 3402 (m) and the regulations thereunder.

(b) Definitions. For purposes of §§ 1.25-2T through 1.25-8T and this section, the following definitions apply:

(1) Mortgage. The term “mortgage” includes deeds of trust, conditional sales contracts, pledges, agreements to hold title in escrow, and any other form of owner financing.

(2) State.

(i) The term “State” includes a possession of the United States and the District of Columbia.

(ii) Mortgage credit certificates issued by or on behalf of any State or political subdivision (“governmental unit”) by constituted authorities empowered to issue such certificates are the certificates of such governmental unit.

(3) Qualified home improvement loan. The term “qualified home improvement loan” has the meaning given that term under section 103A (1)(6) and the regulations thereunder.

(4) Qualified rehabilitation loan. The term “qualified rehabilitation loan” has the meaning given that term under section 103A (1)(7)(A) and the regulations thereunder.

(5) Single-family and owner-occupied residences. The terms “single-family” and “owner-occupied” have the meaning given those terms under section 103A (1)(9) and the regulations thereunder.

(6) Constitutional home rule city. The term “constitutional home rule city” means, with respect to any calendar year, any political subdivision of a State which, under a State constitution which was adopted in 1970 and effective on July 1, 1971, had home rule powers on the 1st day of the calendar year.

(7) Targeted area residence. The term “targeted area residence” has the meaning given that term under section 103A (k) and the regulations thereunder.

(8) Acquisition cost. The term “acquisition cost” has the meaning given that term under section 103A (1)(5) and the regulations thereunder.

(9) Average area purchase price. The term “average area purchase price” has the meaning given that term under subparagraphs (2), (3), and (4) of section 103A (f) and the regulations thereunder. For purposes of this paragraph (b)(9), all determinations of average area purchase price shall be made with respect to residences as that term is defined in section 103A and the regulations thereunder.

(10) Total proceeds. The “total proceeds” of an issue is the sum of the products determined by multiplying -

(i) The certified indebtedness amount of each mortgage credit certificate issued pursuant to such issue, by

(ii) The certificate credit rate specified in such certificate.

Each qualified mortgage credit certificate program shall be treated as a separate issue of mortgage credit certificates.

(11) Residence. The term “residence” includes stock held by a tenant-stockholder in a cooperative housing corporation (as those terms are defined in section 216(b) (1) and (2)). It does not include property such as an appliance, a piece of furniture, a radio, etc., which, under applicable local law, is not a fixture. The term also includes any manufactured home which has a minimum of 400 square feet of living space and a minimum width in excess of 102 inches and which is of a kind customarily used at a fixed location. The preceding sentence shall not apply for purposes of determining the average area purchase price for single-family residences, nor shall it apply for purposes of determining the State ceiling amount. The term “residence” does not, however, include recreational vehicles, campers, and other similar vehicles.

(12) Related person. The term “related person” has the meaning given that term under section 103(b)(6)(C)(i) and § 1.103-10(e)(1).

(13) Date of issue. A mortgage credit certificate is considered issued on the date on which a closing agreement is signed with respect to the certified indebtedness amount.

(c) Affidavits. For purposes of §§ 1.25-1T through 1.25-8T, an affidavit filed in connection with the requirements of §§ 1.25-1T through 1.25-8T shall be made under penalties of perjury. Applicants for mortgage credit certificates who are required by a lender or the issuer to sign affidavits must be informed that any fraudulent statement will result in

(1) the revocation of the individual's mortgage credit certificate, and

(2) a $10,000 penalty under section 6709. Other persons required by a lender or an issuer to provide affidavits must receive similar notice. A person may not rely on an affidavit where that person knows or has reason to know that the information contained in the affidavit is false.

[T.D. 8023, 50 FR 19346, May 8, 1985]

§ 1.25-2T Amount of credit (Temporary).

(a) In general. Except as otherwise provided, the amount of the credit allowable for any taxable year to an individual who holds a qualified mortgage credit certificate is equal to the product of the certificate credit rate (as defined in paragraph (b)) and the amount of the interest paid or accrued by the taxpayer during the taxable year on the certified indebtedness amount (as defined in paragraph (c)).

(b) Certificate credit rate -

(1) In general. For purposes of §§ 1.25-1T through 1.25-8T, the term “certificate credit rate” means the rate specified by the issuer on the mortgage credit certificate. The certificate credit rate shall not be less than 10 percent nor more than 50 percent.

(2) Limitation in certain States.

(i) In the case of a State which -

(A) Has a State ceiling for the calendar year in which an election is made that exceeds 20 percent of the average annual aggregate principal amount of mortgages executed during the immediately preceding 3 calendar years for single-family owner-occupied residences located within the jurisdiction of such State, or

(B) Issued qualified mortgage bonds in an aggregate amount less than $150 million for calendar year 1983.

the certificate credit rate for any mortgage credit certificate issued under such program shall not exceed 20 percent unless the issuing authority submits a plan to the Commissioner to ensure that the weighted average of the certificate credit rates in such mortgage credit certificate program does not exceed 20 percent and the Commissioner approves such plan. For purposes of determining the average annual aggregate principal amount of mortgages executed during the immediately preceding 3 calendar years for single-family owner-occupied residences located within the jurisdiction of such State, an issuer may rely upon the amount published by the Treasury Department for such calendar years. An issuer may rely on a different amount from that safe-harbor limitation where the issuer has made a more accurate and comprehensive determination of that amount. The weighted average of the certificate credit rates in a mortgage credit certificate program is determined by dividing the sum of the products obtained by multiplying the certificate credit rate of each certificate by the certified indebtedness amount with respect to that certificate by the sum of the certified indebtedness amounts of the certificates issued. See section 103A(g) and the regulations thereunder for the definition of the term “State ceiling”.

(ii) The following example illustrates the application of this paragraph (b)(2):

Example.

City Z issues four qualified mortgage credit certificates pursuant to its qualified mortgage credit certificate program. H receives a certificate with a certificate credit rate of 30 percent and a certified indebtedness amount of $50,000. I receives a certificate with a certificate credit rate of 25 percent and a certified indebtedness amount of $100,000. J and K each receive certificates with certificate credit rates of 10 percent; their certified indebtedness amounts are $50,000 and $100,000, respectively. The weighted average of the certificate credit rates is determined by dividing the sum of the products obtained by multiplying the certificate credit rate of each certificate by the certified indebtedness amount with respect to that certificate ((.3 × $50,000) + (.25 × $100,000) + (.1 × $50,000) + (.1 × $100,000)) by the sum of the certified indebtedness amounts of the certificates issued ($50,000 + $100,000 + $50,000 + $100,000). Thus, the weighted average of the certificate credit rates is 18.33 percent ($55,000/$300,000).

(c) Certified indebtedness amount -

(1) In general. The term “certified indebtedness amount” means the amount of indebtedness which is -

(i) Incurred by the taxpayer -

(A) To acquire his principal residence, § 1.25-2T(c)(1)(i),

(B) As a qualified home improvement loan, or

(C) As a qualified rehabilitation loan, and

(ii) Specified in the mortgage credit certificate.

(2) Example. The following example illustrates the application of this paragraph:

Example.

On March 1, 1986, State X, pursuant to its qualified mortgage credit certificate program, provides a mortgage credit certificate to B. State X specifies that the maximum amount of the mortgage loan for which B may claim a credit is $65,000. On March 15, B purchases for $67,000 a single-family dwelling for use as his principal residence. B obtains from Bank M a mortgage loan for $60,000. State X, or Bank M acting on behalf of State X, indicates on B's mortgage credit certificate that the certified indebtedness amount of B's loan is $60,000. B may claim a credit under section 25 (e) based on this amount.

(d) Limitation on credit -

(1) Limitation where certificate credit rate exceeds 20 percent.

(i) If the certificate credit rate of any mortgage credit certificate exceeds 20 percent, the amount of the credit allowed to the taxpayer by section 25(a)(1) for any year shall not exceed $2,000. Any amount denied under this paragraph (d)(1) may not be carried forward under section 25(e)(1) and paragraph (d)(2) of this section.

(ii) If two or more persons hold interests in any residence, the limitation of paragraph (d)(1)(i) shall be allocated among such persons in proporation to their respective interests in the residence.

(2) Carryforward of unused credit.

(i) If the credit allowable under section 25 (a) and § 1.25-2T for any taxable year exceeds the applicable tax limit for that year, the excess (the “unused credit”) will be a carryover to each of the 3 succeeding taxable years and, subject to the limitations of paragraph (d)(2)(ii), will be added to the credit allowable by section 25 (a) and § 1.25-2T for that succeeding year.

(ii) The amount of the unused credit for any taxable year (the “unused credit year”) which may be taken into account under this paragraph (d)(2) for any subsequent taxable year may not exceed the amount by which the applicable tax limit for that subsequent taxable year exceeds the sum of

(A) the amount of the credit allowable under section 25 (a) and § 1.25-1T for the current taxable year, and

(B) the sum of the unused credits which, by reason of this paragraph (d)(2), are carried to that subsequent taxable year and are attributable to taxable years before the unused credit year. Thus, if by reason of this paragraph (d)(2), unused credits from 2 prior taxable years are carried forward to a subsequent taxable year, the unused credit from the earlier of those 2 prior years must be taken into account before the unused credit from the later of those 2 years is taken into account.

(iii) For purposes of this paragraph (d)(2) the term “applicable tax limit” means the limitation imposed by section 26 (a) for the taxable year reduced by the sum of the credits allowable for that year under section 21, relating to expenses for household and dependent care services necessary for gainful employment, section 22, relating to the credit for the elderly and the permanently disabled, section 23, relating to the residential energy credit, and section 24, relating to contributions to candidates for public office. The limitation imposed by section 26 (a) for any taxable year is equal to the taxpayer's tax liability (as defined in section 26 (b)) for that year.

(iv) The following examples illustrate the application of this paragraph (d)(2):

Example 1.

(i) B, a calendar year taxpayer, holds a qualified mortgage credit certificate. For 1986 B's applicable tax limit (i.e., tax liability) is $1,100. The amount of the credit under section 25 (a) and § 1.25-2T for 1986 is $1,700. For 1986 B is not entitled to any of the credits described in sections 21 through 24. Under § 1.25-2T (d)(2), B's unused credit for 1986 is $600, and B is entitled to carry forward that amount to the 3 succeeding years.

(ii) For 1987 B's applicable tax limit is $1,500, the amount of the credit under section 25 (a) and § 1.25-2T is $1,700, and the unused credit is $200. For 1988 B's applicable tax limit is $2,000, the amount of the credit under section 25 (a) and § 1.25-2T is $1,300, and there is no unused credit. For 1987 and 1988 B is not entitled to any of the credits described in sections 21 through 24. No portion of the unused credit for 1986 my be used in 1987. For 1988 B is entitled to claim a credit of $2,000 under section 25 (a) and § 1.25-2T, consisting of a $1,300 credit for 1988, the $600 unused credit for 1986, and $100 of the $200 unused credit for 1987. In addition, B may carry forward the remaining unused credit for 1987 ($100) to 1989 and 1990.

Example 2.

The facts are the same as in Example (1) except that for 1988 B is entitled to a credit of $400 under section 23. B's applicable tax limit for 1988 is $1,600 ($2,000 less $400). For 1988 B is entitled to claim a credit of $1,600 under section 25 (a) and § 1.25-2T, consisting of a $1,300 credit for 1988 and $300 of the unused credit for 1986. In addition, B may carry forward the remaining unused credits of $300 for 1986 to 1989 and of $200 for 1987 to 1989 and 1990.

[T.D. 8023, 50 FR 19346, May 8, 1985]

§ 1.25-3 Qualified mortgage credit certificate.

(a-g) (1)(ii) [Reserved]. For further guidance, see § 1.25-3T(a) through (g)(1)(ii).

(g) (1)(iii) Reissued certificate exception. See paragraph (p) of this section for rules regarding the exception in the case of refinancing existing mortgages.

(g) (2)-(o) [Reserved]. For further guidance, see § 1.25-3T(g)(2) through (o).

(p) Reissued certificates for certain refinancings - (1) In general. If the issuer of a qualified mortgage credit certificate reissues a certificate in place of an existing mortgage credit certificate to the holder of that existing certificate, the reissued certificate is treated as satisfying the requirements of this section. The period for which the reissued certificate is in effect begins with the date of the refinancing (that is, the date on which interest begins accruing on the refinancing loan).

(2) Meaning of existing certificate. For purposes of this paragraph (p), a mortgage credit certificate is an existing certificate only if it satisfies the requirements of this section. An existing certificate may be the original certificate, a certificate issued to a transferee under § 1.25-3T(h)(2)(ii), or a certificate previously reissued under this paragraph (p).

(3) Limitations on reissued certificate. An issuer may reissue a mortgage credit certificate only if all of the following requirements are satisfied:

(i) The reissued certificate is issued to the holder of an existing certificate with respect to the same property to which the existing certificate relates.

(ii) The reissued certificate entirely replaces the existing certificate (that is, the holder cannot retain the existing certificate with respect to any portion of the outstanding balance of the certified mortgage indebtedness specified on the existing certificate).

(iii) The certified mortgage indebtedness specified on the reissued certificate does not exceed the remaining outstanding balance of the certified mortgage indebtedness specified on the existing certificate.

(iv) The reissued certificate does not increase the certificate credit rate specified in the existing certificate.

(v) The reissued certificate does not result in an increase in the tax credit that would otherwise have been allowable to the holder under the existing certificate for any taxable year. The holder of a reissued certificate determines the amount of tax credit that would otherwise have been allowable by multiplying the interest that was scheduled to have been paid on the refinanced loan by the certificate rate of the existing certificate. In the case of a series of refinancings, the tax credit that would otherwise have been allowable is determined from the amount of interest that was scheduled to have been paid on the original loan and the certificate rate of the original certificate.

(A) In the case of a refinanced loan that is a fixed interest rate loan, the interest that was scheduled to be paid on the refinanced loan is determined using the scheduled interest method described in paragraph (p)(3)(v)(C) of this section.

(B) In the case of a refinanced loan that is not a fixed interest rate loan, the interest that was scheduled to be paid on the refinanced loan is determined using either the scheduled interest method described in paragraph (p)(3)(v)(C) of this section or the hypothetical interest method described in paragraph (p)(3)(v)(D) of this section.

(C) The scheduled interest method determines the amount of interest for each taxable year that was scheduled to have been paid in the taxable year based on the terms of the refinanced loan including any changes in the interest rate that would have been required by the terms of the refinanced loan and any payments of principal that would have been required by the terms of the refinanced loan (other than repayments required as a result of any refinancing of the loan).

(D) The hypothetical interest method (which is available only for refinanced loans that are not fixed interest rate loans) determines the amount of interest treated as having been scheduled to be paid for a taxable year by constructing an amortization schedule for a hypothetical self-amortizing loan with level payments. The hypothetical loan must have a principal amount equal to the remaining outstanding balance of the certified mortgage indebtedness specified on the existing certificate, a maturity equal to that of the refinanced loan, and interest equal to the annual percentage rate (APR) of the refinancing loan that is required to be calculated for the Federal Truth in Lending Act.

(E) A holder must consistently apply the scheduled interest method or the hypothetical interest method for all taxable years beginning with the first taxable year the tax credit is claimed by the holder based upon the reissued certificate.

(4) Examples. The following examples illustrate the application of paragraph (p)(3)(v) of this section:

Example 1.

A holder of an existing certificate that meets the requirements of this section seeks to refinance the mortgage on the property to which the existing certificate relates. The final payment on the holder's existing mortgage is due on December 31, 2000; the final payment on the new mortgage would not be due until January 31, 2004. The holder requests that the issuer provide to the holder a reissued mortgage credit certificate in place of the existing certificate. The requested certificate would have the same certificate credit rate as the existing certificate. For each calendar year through the year 2000, the credit that would be allowable to the holder with respect to the new mortgage under the requested certificate would not exceed the credit allowable for that year under the existing certificate. The requested certificate, however, would allow the holder credits for the years 2001 through 2004, years for which, due to the earlier scheduled retirement of the existing mortgage, no credit would be allowable under the existing certificate. Under paragraph (p)(3)(v) of this section, the issuer may not reissue the certificate as requested because, under the existing certificate, no credit would be allowable for the years 2001 through 2004. The issuer may, however, provide a reissued certificate that limits the amount of the credit allowable in each year to the amount allowable under the existing certificate. Because the existing certificate would allow no credit after December 31, 2000, the reissued certificate could expire on December 31, 2000.

Example 2.

(a) The facts are the same as Example 1 except that the existing mortgage loan has a variable rate of interest and the refinancing loan will have a fixed rate of interest. To determine whether the limit under paragraph (p)(3)(v) of this section is met for any taxable year, the holder must calculate the amount of credit that otherwise would have been allowable absent the refinancing. This requires a determination of the amount of interest that would have been payable on the refinanced loan for the taxable year. The holder may determine this amount by -

(1) Applying the terms of the refinanced loan, including the variable interest rate or rates, for the taxable year as though the refinanced loan continued to exist; or

(2) Obtaining the amount of interest, and calculating the amount of credit that would have been available, from the schedule of equal payments that fully amortize a hypothetical loan