Portion of adjusted basis of property attributable to gross income of M effectively connected for 1971 with conduct of trade or business in United States ($30,000 * 60%) | $18,000 |
Portion of fair market value of property attributable to gross income of M not effectively connected for 1971 with conduct of trade or business in United States ($100,000 * 40%) | 40,000 |
Total dividend | 58,000 |
Excess of dividend from N over amount which is 100/85ths of amount of sec. 245(a) deduction ($42,000-[$28,560 * 100/85]) | $8,400 |
Proportionate part of sec. 78 dividend ($21,000 * $8,400/$42,000) | 4,200 |
Taxable income from sources without the United States | 12,600 |
Thus, a dividend deemed paid under section 995(b)(1) (A), (B), or (C) (relating to certain deemed distributions in qualified years) will be treated in full as gross income from sources within the United States. To the extent that a dividend from a DISC or former DISC is paid out of other earnings and profits (as defined in § 1.996-3(d) ), subparagraph (2) of this paragraph shall apply. To the extent that a dividend from a DISC or former DISC is paid out of previously taxed income (as defined in § 1.996-3(c) ), see section 996(a)(3) (relating to the exclusion from gross income of amounts distributed out of previously taxed income). In determining the source of income of certain dividends from a DISC or former DISC, the source of income from any transaction which gives rise to gross receipts (as defined in § 1.993-6 ), in the hands of the DISC or former DISC, is immaterial.
For purposes of subdivisions (i)(b) and (iv) of this subparagraph, if by reason of section 995(c), gain is included in the shareholder's gross income as a dividend, accumulated DISC income shall be treated as if it were reduced under § 1.996-3(b)(3) .
Total dividend | Amount of dividend from sources within the United States | |
Deemed distribution under sec. 995(b)(1)(D) as in effect for taxable years beginning before January 1, 1976 | $9,500 | $500.00 |
Deemed distribution under section 995(b)(1)(G) | 100 | 4.17 |
Actual distribution that reduces accumulated DISC income | 2,000 | 83.33 |
Totals | $11,600 | $587.50 |
Thus, pursuant to subdivision (v)(b) of this subparagraph, at the beginning of 1974 Y has $412.50, i.e., $1,000-$587.50, of nonqualified export taxable income.
(D) | $500, | i.e.,1/2 * $1,000. |
(E) | 7,800, | i.e.,.40 * [$21,000 - $(550 + 450 + 500)]. |
(F)(i) | 5,850, | i.e.,1/2 * [$21,000 - $550 + 450 + 500 + 7,800)]. |
(ii) | 585, | i.e., $5,850 * .10 |
(iii) | 1,265 | |
Total | 16,000 |
The remainder of these distributions, $15,600 ($16,000 minus $400), is treated under subdivision (iii)(b) of this subparagraph as gross income from sources without the United States.
Total earnings and profits | Previously taxed income | Accumulated DISC income attributable to taxable income from translations which give rise to gross receipts which- | ||
Are qualified export receipts | Are not qualified export receipts | |||
(1) Balance: January 1, 1977 | $16,000 | $12,000 | $3,100 | $900 |
(2) Earnings and profits for 1977, before actual and section 955(b)(1)(G) distributions | 21,000 | 17,000 | 3,900 | 1 100 |
(3) Balance: December 31, 1977 | 37,000 | 29,000 | 7,000 | 1,000 |
(4) Distribution under section 995(b)(1)(G) | 1,000 | (875) | 2 (125) | |
(5) Balance | 37,000 | 30,000 | 6,125 | 875 |
(6) Actual distribution | (32,000) | (30,000) | (1,750) | 3 (250) |
(7) Balance: January 1, 1978 | 5,000 | 4,375 | 625 |
1 The total of nonqualified export taxable income ($500) minus the portion of such income, under subdivision (iii)(b) of this subparagraph, deemed distributed pursuant to section 995(b)(1)(D), (E), and (F) ($400), as computed under (d)(2) of this example.
2 Under subdivision (iv)(b) of this subparagraph, $1,000/$8,000 * $1,000.
3 Under subdivision (iv)(b) of this subparagraph, $1,000/$8,000 * $2,000 (amount of actual distribution that reduces accumulated DISC income).
26 C.F.R. §1.861-3
For FEDERAL REGISTER citations affecting §1.861-3, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov.