U.S. source taxable income$1,000
Foreign source taxable income (loss) subject to the general limitation($500)
Foreign source taxable income subject to the passive interest limitation$200
X has a general limitation overall foreign loss of $500 for 1983 in accordance with paragraph (c) (1) of this section. Since the general limitation overall foreign loss is not considered to offset income under the separate limitation for passive interest income, it therefore offsets $500 of United States source taxable income. This amount is added to X's general limitation overall foreign loss account at the end of 1983 in accordance with paragraphs (c) (1) and (d) (1) of this section.
U.S. source taxable income$1,000
Foreign source taxable income (loss) subject to the general limitation($500)
Foreign source taxable income subject to the passive interest limitation$250
For its pre-1983 taxable years, Y filed its returns determining its overall foreign losses on a combined basis. In accordance with paragraphs (a) and (c) (1) of this section, Y may net the foreign source income and loss before offsetting the United States source income. Y therefore has a section 904(d)(1)(A-C) overall foreign loss account of $250 at the end of 1982.
U.S. source taxable income$200
Foreign source taxable income (loss) subject to the general limitation($1,000)
Foreign source taxable income (loss) subject to the passive limitation$1,800
X has a general limitation overall foreign loss of $1,000 in accordance with paragraph (c)(1) of this section. The overall foreign loss offsets $200 of United States source taxable income in 1985 and, therefore, X has a $200 general limitation overall foreign loss account at the end of 1985. The remaining $800 general limitation loss is offset by the passive interest limitation income in 1985 so that X has no net operating loss carryover that is attributable to the general limitation loss and no additional amount attributable to that loss will be added to the overall foreign loss account in 1985 or in any other year.
26 C.F.R. §1.904(f)-1