26 C.F.R. § 1.163(j)-0

Current through November 30, 2024

Section 1.163(j)-0 - Table of contents

This section lists the table of contents for §§ 1.163(j)-1 through 1.163(j)-11 .

§ 1.163(j)-1 Definitions.

(a) In general.

(b) Definitions.

(1) Adjusted taxable income.

(i) Additions.

(ii) Subtractions.

(iii) Depreciation, amortization, or depletion capitalized under section 263A.

(iv) Application of § 1.163(j)-1(b)(1)(ii)(C), (D), and (E) .

(A) Sale or other disposition.

(1) In general.

(2) Intercompany transactions.

(3) Deconsolidations.

(4) Nonrecognition transactions.

(B) Deductions by members of a consolidated group.

(1) In general.

(2) Application of the alternative computation method.

(C) Successor rules.

(1) Successor assets.

(2) Successor entities.

(D) Anti-duplication rule.

(1) In general.

(2) Adjustments following deconsolidation.

(E) Alternative computation method.

(1) Alternative computation method for property dispositions.

(2) Alternative computation method for dispositions of member stock.

(3) Alternative computation method for dispositions of partnership interests.

(F) Cap on negative adjustments.

(1) In general.

(2) Example.

(G) Treatment of depreciation, amortization, or depletion capitalized under section 263A.

(v) Other adjustments.

(vi) Additional rules relating to adjusted taxable income in other sections.

(vii) ATI cannot be less than zero.

(viii) Examples.

(2) Applicable CFC.

(3) Business interest expense.

(i) In general.

(ii) Special rules.

(4) Business interest income.

(i) In general.

(ii) Special rules.

(5) C corporation.

(6) Cleared swap.

(7) Consolidated group.

(8) Consolidated return year.

(9) Current-year business interest expense.

(10) Disallowed business interest expense.

(11) Disallowed business interest expense carryforward.

(12) Disallowed disqualified interest.

(13) Electing farming business.

(14) Electing real property trade or business.

(15) Excepted regulated utility trade or business.

(i) In general.

(A) Automatically excepted regulated utility trades or businesses.

(B) Electing regulated utility trades or businesses.

(C) Designated excepted regulated utility trades or businesses.

(ii) Depreciation and excepted and non-excepted utility trades or businesses.

(A) Depreciation.

(B) Allocation of items.

(iii) Election to be an excepted regulated utility trade or business.

(A) In general.

(B) Scope and effect of election.

(1) In general.

(2) Irrevocability.

(C) Time and manner of making election.

(1) In general.

(2) Election statement contents.

(3) Consolidated group's or partnership's trade or business.

(4) Termination of election.

(5) Additional guidance.

(16) Excess business interest expense.

(17) Excess taxable income.

(18) Floor plan financing indebtedness.

(19) Floor plan financing interest expense.

(20) Group.

(21) Intercompany transaction.

(22) Interest.

(i) In general.

(ii) Swaps with significant nonperiodic payments.

(A) In general.

(B) Exception for cleared swaps.

(C) Exception for non-cleared swaps subject to margin or collateral requirements.

(iii) Other amounts treated as interest.

(A) Treatment of premium.

(1) Issuer.

(2) Holder.

(B) Treatment of ordinary income or loss on certain debt instruments.

(C) Substitute interest payments.

(D) Section 1258 gain.

(E) Factoring income.

(F) Section 163(j) interest dividends.

(1) In general.

(2) Limitation on amount treated as interest income.

(3) Conduit amounts.

(4) Holding period.

(5) Exception to holding period requirement for money market funds and certain regularly declared dividends.

(iv) Anti-avoidance rules.

(A) Principal purpose to reduce interest expense.

(1) Treatment as interest expense.

(2) Corresponding treatment of amounts as interest income.

(B) Interest income artificially increased.

(C) Principal purpose.

(D) Coordination with anti-avoidance rule in § 1.163(j)-2(j) .

(v) Examples.

(23) Interest expense.

(24) Interest income.

(25) Member.

(26) Motor vehicle.

(27) Old section 163(j).

(28) Ownership change.

(29) Ownership date.

(30) Real estate investment trust.

(31) Real property.

(32) Regulated investment company.

(33) Relevant foreign corporation.

(34) S corporation.

(35) Section 163(j) interest dividend.

(i) In general.

(ii) Reduction in the case of excess reported amounts.

(iii) Allocation of excess reported amount.

(A) In general.

(B) Special rule for noncalendar year RICs.

(iv) Definitions.

(A) Reported section 163(j) interest dividend amount.

(B) Excess reported amount.

(C) Aggregate reported amount.

(D) Post-December reported amount.

(E) Excess section 163(j) interest income.

(v) Example.

(36) Section 163(j) limitation.

(37) Section 163(j) regulations.

(38) Separate return limitation year.

(39) Separate return year.

(40) Separate tentative taxable income.

(41) Tax-exempt corporation.

(42) Tax-exempt organization.

(43) Tentative taxable income.

(i) In general.

(ii) [Reserved]

(iii) Special rules for defining tentative taxable income.

(44) Trade or business.

(i) In general.

(ii) Excepted trade or business.

(iii) Non-excepted trade or business.

(45) Unadjusted basis.

(46) United States shareholder.

(c) Applicability date.

(1) In general.

(2) Anti-avoidance rules.

(3) Swaps with significant nonperiodic payments.

(i) In general.

(ii) Anti-avoidance rule.

(4) Paragraphs (b)(1)(iv)(A)(2) through (4), (B) through (G), (b)(22)(iii)(F), and (b)(35).

§ 1.163(j)-2Deduction for business interest expense limited.

(a) Overview.

(b) General rule.

(1) In general.

(2) 50 percent ATI limitation for taxable years beginning in 2019 or 2020.

(3) Election to use 2019 ATI in 2020.

(i) In general.

(ii) Short taxable years.

(iii) Transactions to which section 381 applies.

(iv) Consolidated groups.

(4) Time and manner of making or revoking the elections.

(c) Disallowed business interest expense carryforward.

(1) In general.

(2) Coordination with small business exemption.

(3) Cross-references.

(d) Small business exemption.

(1) Exemption.

(2) Application of the gross receipts test.

(i) In general.

(ii) Gross receipts of individuals.

(iii) Partners and S corporation shareholders.

(iv) Tax-exempt organizations.

(3) Determining a syndicate's loss amount.

(e) REMICs.

(f) Trusts.

(i) Calculation of ATI with respect to certain trusts and estates.

(ii) Calculation of ATI with respect to certain beneficiaries.

(g) Tax-exempt organizations.

(h) Examples.

(i) [Reserved]

(j) Anti-avoidance rule.

(1) In general.

(2) Examples.

(k) Applicability dates.

(1) In general.

(2) Paragraphs (b)(3)(iii), (b)(3)(iv), and (d)(3).

§ 1.163(j)-3 Relationship of the section 163(j) limitation to other provisions affecting interest.

(a) Overview.

(b) Coordination of section 163(j) with certain other provisions.

(1) In general.

(2) Disallowed interest provisions.

(3) Deferred interest provisions.

(4) At risk rules, passive activity loss provisions, and limitation on excess business losses of noncorporate taxpayers.

(5) Capitalized interest expenses.

(6) Reductions under section 246A.

(7) Section 381.

(8) Section 382.

(c) Examples.

(d) Applicability date.

§ 1.163(j)-4 General rules applicable to C corporations (including REITs, RICs, and members of consolidated groups) and tax-exempt corporations.

(a) Scope.

(b) Characterization of items of income, gain, deduction, or loss.

(1) Interest expense and interest income.

(2) Adjusted taxable income.

(3) Investment interest, investment income, investment expenses, and certain other tax items of a partnership with a C corporation partner.

(i) Characterization as expense or income properly allocable to a trade or business.

(ii) Effect of characterization on partnership.

(iii) Separately stated interest expense and interest income of a partnership not treated as excess business interest expense or excess taxable income of a C corporation partner.

(iv) Treatment of deemed inclusions of a domestic partnership that are not allocable to any trade or business.

(4) Application to RICs and REITs.

(i) In general.

(ii) Tentative taxable income of RICs and REITs.

(iii) Other adjustments to adjusted taxable income for RICs and REITs.

(5) Application to tax-exempt corporations.

(6) Adjusted taxable income of cooperatives.

(7) Examples.

(c) Effect on earnings and profits.

(1) In general.

(2) Special rule for RICs and REITs.

(3) Special rule for partners that are C corporations.

(4) Examples.

(d) Special rules for consolidated groups.

(1) Scope.

(2) Calculation of the section 163(j) limitation for members of a consolidated group.

(i) In general.

(ii) Interest.

(iii) Calculation of business interest expense and business interest income for a consolidated group.

(iv) Calculation of adjusted taxable income.

(v) Treatment of intercompany obligations.

(A) In general.

(B) Repurchase premium.

(3) Investment adjustments.

(4) Examples.

(e) Ownership of partnership interests by members of a consolidated group.

(1) [Reserved]

(2) Change in status of a member.

(3) Basis adjustments under § 1.1502-32 .

(4) Excess business interest expense and § 1.1502-36 .

(f) Cross-references.

(g) Applicability date.

(1) In general.

(2) [Reserved]

§ 1.163(j)-5 General rules governing disallowed business interest expense carryforwards for C corporations.

(a) Scope and definitions.

(1) Scope.

(2) Definitions.

(i) Allocable share of the consolidated group's remaining section 163(j) limitation.

(ii) Consolidated group's remaining section 163(j) limitation.

(iii) Remaining current-year interest ratio.

(b) Treatment of disallowed business interest expense carryforwards.

(1) In general.

(2) Deduction of business interest expense.

(3) Consolidated groups.

(i) In general.

(ii) Deduction of business interest expense.

(A) General rule.

(B) Section 163(j) limitation equals or exceeds the current-year business interest expense and disallowed business interest expense carryforwards from prior taxable years.

(C) Current-year business interest expense and disallowed business interest expense carryforwards exceed section 163(j) limitation.

(iii) Departure from group.

(iv) Example: Deduction of interest expense.

(c) Disallowed business interest expense carryforwards in transactions to which section 381(a) applies.

(d) Limitations on disallowed business interest expense carryforwards from separate return limitation years.

(1) General rule.

(A) Cumulative section 163(j) SRLY limitation.

(B) Subgrouping.

(2) Deduction of disallowed business interest expense carryforwards arising in a SRLY.

(3) Examples.

(e) Application of section 382.

(1) Pre-change loss.

(2) Loss corporation.

(3) Ordering rules for utilization of pre-change losses and for absorption of the section 382 limitation.

(4) Disallowed business interest expense from the pre-change period in the year of a testing date.

(5) Recognized built-in loss.

(f) Overlap of SRLY limitation with section 382.

(g) Additional limitations.

(h) Applicability date.

§ 1.163(j)-6 Application of the business interest deduction limitation to partnerships and subchapter S Corporations.

(a) Overview.

(b) Definitions.

(1) Section 163(j) items.

(2) Partner basis items.

(3) Remedial items.

(4) Excess business interest income.

(5) Deductible business interest expense.

(6) Section 163(j) excess items.

(7) Non-excepted assets.

(8) Excepted assets.

(c) Business interest income and business interest expense of the partnership.

(1) Modification of business interest income for partnerships.

(2) Modification of business interest expense for partnerships.

(3) Transition rule.

(4) Character of business interest expense.

(d) Adjusted taxable income of a partnership.

(1) Tentative taxable income of a partnership.

(2) Section 734(b), partner basis items, and remedial items.

(3) Section 743(b) adjustments and publicly traded partnerships.

(4) Modification of adjusted taxable income for partnerships.

(5) Election to use 2019 adjusted taxable income for taxable years beginning in 2020.

(e) Adjusted taxable income and business interest income of partners.

(1) Modification of adjusted taxable income for partners.

(2) Partner basis items and remedial items.

(3) Disposition of partnership interests.

(4) Double counting of business interest income and floor plan financing interest expense prohibited.

(5) Partner basis items, remedial items, and publicly traded partnerships.

(6) [Reserved]

(f) Allocation and determination of section 163(j) excess items made in the same manner as nonseparately stated taxable income or loss of the partnership.

(1) Overview.

(i) In general.

(ii) Relevance solely for purposes of section 163(j).

(iii) Exception applicable to publicly traded partnerships.

(2) Steps for allocating deductible business interest expense and section 163(j) excess items.

(i) Partnership-level calculation required by section 163(j)(4)(A).

(ii) Determination of each partner's relevant section 163(j) items.

(iii) Partner-level comparison of business interest income and business interest expense.

(iv) Matching partnership and aggregate partner excess business interest income.

(v) Remaining business interest expense determination.

(vi) Determination of final allocable ATI.

(A) Positive allocable ATI.

(B) Negative allocable ATI.

(C) Final allocable ATI.

(vii) Partner-level comparison of 30 percent of adjusted taxable income and remaining business interest expense.

(viii) Partner priority right to ATI capacity excess determination.

(ix) Matching partnership and aggregate partner excess taxable income.

(x) Matching partnership and aggregate partner excess business interest expense.

(xi) Final section 163(j) excess item and deductible business interest expense allocation.

(g) Carryforwards.

(1) In general.

(2) Treatment of excess business interest expense allocated to partners.

(3) Excess taxable income and excess business interest income ordering rule.

(4) Special rule for taxable years beginning in 2019 and 2020.

(h) Basis adjustments.

(1) Section 704(d) ordering.

(2) Excess business interest expense basis adjustments.

(3) Partner basis adjustment upon disposition of partnership interest.

(4)-(5) [Reserved]

(i)-(j) [Reserved]

(k) Investment items and certain other items.

(l) S corporations.

(1) In general.

(i) Corporate level limitation.

(ii) Short taxable periods.

(2) Character of deductible business interest expense.

(3) Adjusted taxable income of an S corporation.

(4) Adjusted taxable income and business interest income of S corporation shareholders.

(i) Adjusted taxable income of S corporation shareholders.

(ii) Disposition of S corporation stock.

(iii) Double counting of business interest income and floor plan financing interest expense prohibited.

(iv) [Reserved]

(5) Carryforwards.

(6) Basis adjustments and disallowed business interest expense carryforwards.

(7) Accumulated adjustment accounts.

(8) Termination of qualified subchapter S subsidiary election.

(9) Investment items.

(10) Application of section 382.

(m) Partnerships and S corporations not subject to section 163(j).

(1) Exempt partnerships and S corporations.

(2) Partnerships and S corporations engaged in excepted trades or businesses.

(3) Treatment of excess business interest expense from partnerships that are exempt entities in a succeeding taxable year.

(4) S corporations with disallowed business interest expense carryforwards prior to becoming exempt entities.

(n) Treatment of self-charged lending transactions between partnerships and partners.

(o) Examples.

(p) Applicability dates.

(1) In general.

(2) Paragraphs (c)(1) and (2), (d)(3) through (5), (e)(5), (f)(1)(iii), (g)(4), (n), and (o)(24) through (29), and (34) through (36).

§ 1.163(j)-7Application of the section 163(j) limitation to foreign corporations and United States shareholders.

(a) Overview.

(b) General rule regarding the application of section 163(j) to relevant foreign corporations.

(c) Application of section 163(j) to CFC group members of a CFC group.

(1) Scope.

(2) Calculation of section 163(j) limitation for a CFC group for a specified period.

(i) In general.

(ii) Certain transactions between CFC group members disregarded.

(iii) [Reserved]

(iv) [Reserved]

(3) Deduction of business interest expense.

(i) CFC group business interest expense.

(A) In general.

(B) Modifications to relevant terms.

(ii) Carryforwards treated as attributable to the same taxable year.

(iii) Multiple specified taxable years of a CFC group member with respect to a specified period.

(iv) Limitation on pre-group disallowed business interest expense carryforward.

(A) General rule.

(1) CFC group member pre-group disallowed business interest expense carryforward.

(2) Subgrouping.

(3) Transition rule.

(B) Deduction of pre-group disallowed business interest expense carryforwards.

(4) Currency translation.

(5) Special rule for specified periods beginning in 2019 or 2020.

(i) 50 percent ATI limitation applies to a specified period of a CFC group.

(ii) Election to use 2019 ATI applies to a specified period of a CFC group.

(A) In general.

(B) Specified taxable years that do not begin in 2020.

(d) Determination of a specified group and specified group members.

(1) Scope.

(2) Rules for determining a specified group.

(i) Definition of a specified group.

(ii) Indirect ownership.

(iii) Specified group parent.

(iv) Qualified U.S. person.

(v) Stock.

(vi) Options treated as exercised.

(vii) When a specified group ceases to exist.

(3) Rules for determining a specified group member.

(e) Rules and procedures for treating a specified group as a CFC group.

(1) Scope.

(2) CFC group and CFC group member.

(i) CFC group.

(ii) CFC group member.

(3) Duration of a CFC group.

(4) Joining or leaving a CFC group.

(5) Manner of making or revoking a CFC group election.

(i) In general.

(ii) Revocation by election.

(iii) Timing.

(iv) Election statement.

(v) Effect of prior CFC group election.

(6) Annual information reporting.

(f) Treatment of a CFC group member that has ECI.

(1) In general.

(2) [Reserved]

(g) Rules concerning the computation of adjusted taxable income of a relevant foreign corporation.

(1) Tentative taxable income.

(2) Treatment of certain dividends.

(3) Treatment of certain foreign income taxes.

(4) Anti-abuse rule.

(i) In general.

(ii) ATI adjustment amount.

(A) In general.

(B) Special rule for taxable years or specified periods beginning in 2019 or 2020.

(iii) Applicable partnership.

(h) Election to apply safe-harbor.

(1) In general.

(2) Eligibility for safe-harbor election.

(i) Stand-alone applicable CFC.

(ii) CFC group.

(iii) Currency translation.

(3) Eligible amount.

(i) Stand-alone applicable CFC.

(ii) CFC group.

(iii) Additional rules for determining an eligible amount.

(4) Qualified tentative taxable income.

(5) Manner of making a safe-harbor election.

(i) In general.

(ii) Election statement.

(6) Special rule for taxable years or specified periods beginning in 2019 or 2020.

(i)-(j) [Reserved]

(k) Definitions.

(1) Applicable partnership.

(2) Applicable specified taxable year.

(3) ATI adjustment amount.

(4) [Reserved]

(5) [Reserved]

(6) CFC group.

(7) CFC group election.

(8) CFC group member.

(9) [Reserved]

(10) Cumulative section 163(j) pre-group carryforward limitation.

(11) Current group.

(12) Designated U.S. person.

(13) ECI deemed corporation.

(14) Effectively connected income.

(15) Eligible amount.

(16) Former group.

(17) Loss member.

(18) Payment amount.

(19) Pre-group disallowed business interest expense carryforward.

(20) Qualified tentative taxable income.

(21) Qualified U.S. person.

(22) Relevant period.

(23) Safe-harbor election.

(24) Specified borrower.

(25) Specified group.

(26) Specified group member.

(27) Specified group parent.

(28) Specified lender.

(29) Specified period.

(i) In general.

(ii) Short specified period.

(30) Specified taxable year.

(31) Stand-alone applicable CFC.

(32) Stock.

(l) Examples.

(m) Applicability dates.

(1) General applicability date.

(2) Exception.

(3) Early application.

(i) Rules for paragraphs (b) and (g)(1) and (2) of this section.

(ii) Rules for certain other paragraphs in this section.

(4) Additional rules that must be applied consistently.

(5) Election for prior taxable years.

§ 1.163(j)-8 [Reserved]

§ 1.163(j)-9 Elections for excepted trades or businesses; safe harbor for certain REITs.

(a) Overview.

(b) Availability of election.

(1) In general.

(2) Special rules.

(i) Exempt small businesses.

(ii) Section 162 trade or business not required for electing real property trade or business.

(c) Scope and effect of election.

(1) In general.

(2) Irrevocability.

(3) Depreciation.

(d) Time and manner of making election.

(1) In general.

(2) Election statement contents.

(3) Consolidated group's trade or business.

(4) Partnership's trade or business.

(e) Termination of election.

(1) In general.

(2) Taxable asset transfer defined.

(3) Related party defined.

(4) Anti-abuse rule.

(f) Additional guidance.

(g) Examples.

(h) Safe harbor for REITs.

(1) In general.

(2) REITs that do not significantly invest in real property financing assets.

(3) REITs that significantly invest in real property financing assets.

(4) REIT real property assets, interests in partnerships, and shares in other REITs.

(i) Real property assets.

(ii) Partnership interests.

(iii) Shares in other REITs.

(A) In general.

(B) Information necessary.

(iv) Tiered entities.

(5) Value of shares in other REITs.

(i) In general.

(ii) Information necessary.

(iii) Tiered REITs.

(6) Real property financing assets.

(7) Application of safe harbor for partnerships controlled by REITS.

(8) REITs or partnerships controlled by REITs that do not apply the safe harbor.

(i) [Reserved]

(j) Special anti-abuse rule for certain real property trades or businesses.

(1) In general.

(2) Exceptions.

(i) De minimis exception.

(ii) Look-through exception.

(iii) Inapplicability of exceptions to consolidated groups.

(iv) Exception for certain REITs.

(3) Allocations.

(4) Examples.

(k) Applicability date.

§ 1.163(j)-10Allocation of interest expense, interest income, and other items of expense and gross income to an excepted trade or business.

(a) Overview.

(1) In general.

(i) Purposes.

(ii) Application of section.

(2) Coordination with other rules.

(i) In general.

(ii) Treatment of investment interest, investment income, investment expenses, and certain other tax items of a partnership with a C corporation or tax-exempt corporation as a partner.

(3) Application of allocation rules to foreign corporations and foreign partnerships.

(4) Application of allocation rules to members of a consolidated group.

(i) In general.

(ii) Application of excepted business percentage to members of a consolidated group.

(iii) Basis in assets transferred in an intercompany transaction.

(5) Tax-exempt organizations.

(6) Application of allocation rules to disallowed disqualified interest.

(7) Examples.

(b) Allocation of tax items other than interest expense and interest income.

(1) In general.

(2) Gross income other than dividends and interest income.

(3) Dividends.

(i) Look-through rule.

(ii) Inapplicability of the look-through rule.

(4) Gain or loss from the disposition of non-consolidated C corporation stock, partnership interests, or S corporation stock.

(i) Non-consolidated C corporations.

(ii) Partnerships and S corporations.

(5) Expenses, losses, and other deductions.

(i) Expenses, losses, and other deductions that are definitely related to a trade or business.

(ii) Other deductions.

(6) Treatment of investment items and certain other items of a partnership with a C corporation partner.

(7) Examples: Allocation of income and expense.

(c) Allocating interest expense and interest income that is properly allocable to a trade or business.

(1) General rule.

(i) In general.

(ii) De minimis exception.

(2) Example.

(3) Asset used in more than one trade or business.

(i) General rule.

(ii) Permissible methodologies for allocating asset basis between or among two or more trades or businesses.

(iii) Special rules.

(A) Consistent allocation methodologies.

(1) In general.

(2) Consent to change allocation methodology.

(B) De minimis exception.

(C) Allocations of excepted regulated utility trades or businesses.

(1) In general.

(2) Permissible method for allocating asset basis for utility trades or businesses.

(3) De minimis rule for excepted utility trades or businesses.

(4) Example.

(D) Special allocation rule for real property trades or business subject to special anti-abuse rule.

(1) In general.

(2) Allocation methodology for real property.

(3) Example.

(4) Disallowed business interest expense carryforwards; floor plan financing interest expense.

(5) Additional rules relating to basis.

(i) Calculation of adjusted basis.

(A) Non-depreciable property other than land.

(B) Depreciable property other than inherently permanent structures.

(C) Special rule for land and inherently permanent structures.

(D) Depreciable or amortizable intangible property and depreciable income forecast method property.

(E) Assets not yet used in a trade or business.

(F) Trusts established to fund specific liabilities.

(G) Inherently permanent structure.

(ii) Partnership interests; stock in non-consolidated C corporations.

(A) Partnership interests.

(1) Calculation of asset basis.

(2) Allocation of asset basis.

(i) In general.

(ii) De minimis rule.

(iii) Partnership assets not properly allocable to a trade or business.

(iv) Inapplicability of partnership look-through rule.

(B) Stock in domestic non-consolidated corporations.

(1) In general.

(2) Domestic non-consolidated C corporations.

(i) Allocation of asset basis.

(ii) De minimis rule.

(iii) Inapplicability of corporate look-through rule.

(iv) Use of inside basis for purposes of C corporation look-through rule.

(3) S corporations.

(i) Calculation of asset basis.

(ii) Allocation of asset basis.

(iii) De minimis rule.

(iv) Inapplicability of S corporation look-through rule.

(C) Stock in relevant foreign corporations.

(1) In general.

(2) Special rule for CFC utilities.

(D) Limitations on application of look-through rules.

(1) Inapplicability of look-through rule to partnerships or non-consolidated C corporations to which the small business exemption applies.

(2) Limitation on application of look-through rule to C corporations.

(D) Inapplicability of look-through rule to partnerships or non-consolidated C corporations to which the small business exemption applies.

(E) Tiered entities.

(iii) Cash and cash equivalents and customer receivables.

(iv) Deemed asset sale.

(v) Other adjustments.

(6) Determination dates; determination periods; reporting requirements.

(i) Determination dates and determination periods.

(A) Quarterly determination periods.

(B) Annual determination periods.

(ii) Application of look-through rules.

(iii) Reporting requirements.

(A) Books and records.

(B) Information statement.

(iv) Failure to file statement.

(7) Ownership threshold for look-through rules.

(i) Corporations.

(A) Asset basis.

(B) Dividends.

(ii) Partnerships.

(iii) Inapplicability of look-through rule.

(8) Anti-abuse rule.

(d) Direct allocations.

(1) In general.

(2) Qualified nonrecourse indebtedness.

(3) Assets used in more than one trade or business.

(4) Adjustments to basis of assets to account for direct allocations.

(5) Example: Direct allocation of interest expense.

(e) Examples.

(f) Applicability dates.

(1) In general.

(2) Paragraph (c)(5)(ii)(D)(2).

§ 1.163(j)-11 Transition rules.

(a) Overview.

(b) Application of section 163(j) limitation if a corporation joins a consolidated group during a taxable year of the group beginning before January 1, 2018.

(1) In general.

(2) Example

(c) Treatment of disallowed disqualified interest.

(1) In general.

(2) Earnings and profits.

(3) Disallowed disqualified interest of members of an affiliated group.

(i) Scope.

(ii) Allocation of disallowed disqualified interest to members of the affiliated group.

(A) In general.

(B) Definitions.

(1) Allocable share of the affiliated group's disallowed disqualified interest.

(2) Disallowed disqualified interest ratio.

(3) Exempt related person interest expense.

(iii) Treatment of carryforwards.

(4) Application of section 382.

(i) Ownership change occurring before November 13, 2020.

(A) Pre-change loss.

(B) Loss corporation.

(ii) Ownership change occurring on or after November 13, 2020.

(A) Pre-change loss.

(B) Loss corporation.

(5) Treatment of excess limitation from taxable years beginning before January 1, 2018.

(6) Example: Members of an affiliated group.

(d) Applicability date.

26 C.F.R. §1.163(j)-0

T.D. 9905, 85 FR 56760 , Sept. 14, 2020, as amended by T.D. 9943, 86 FR 5522 , Jan. 19, 2021

T.D. 9905, 85 FR 56760 , 9/14/2020, as amended by T.D. 9943, 86 FR 5522 , 1/19/2021