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PART 1—INCOME TAXES
Determination of Sources of Income
§ 1.861-8 Computation of taxable income from sources within the United States and from other sources and activities.
• n so requires, the statutory grouping or the residual grouping may include, or consist entirely of, excluded income. See paragraph (d)(2) of this section with respect to the allocation and apportionme
• paragraph (d)(2) of this section with respect to the allocation and apportionment of deductions to excluded income. / (5) Effective date—(i) Taxable years beginning after Decembe
• class, and paragraph (d)(2) of this section which provides that a class of gross income may include excluded income. Allocation is accomplished by determining, with respect to each deduction, the clas
• ble to this class of income, even though X's gross income from sources outside the United States is excluded income since it is not effectively connected with a U.S. trade or business. / (iii)
§ 1.861-8T Computation of taxable income from sources within the United States and from other sources and activities (temporary).
• not considered tax exempt. The following items are not considered to be exempt, eliminated, or excluded income and, thus, may have expenses, losses, or other deductions allocated and apportioned
• portionment. For purposes of apportioning expenses, assets that generate exempt, eliminated, or excluded income are not taken into account. Because X's municipal bonds are tax exempt, they are not
foreign tax credit
§ 1.904-4 Separate application of section 904 with respect to certain categories of income.
• utions to determine whether such distributions are out of earnings and profits associated with such excluded income. For an example illustrating the operation of this paragraph (c)(7)(iii), see paragr
PART 1—INCOME TAXES
Earned Income of Citizens or Residents of United States
§ 1.911-6 Disallowance of deductions, exclusions, and credits.
• hat does not claim the portion of the deduction that is disallowed because it is chargeable against excluded income, or / (ii) Include in income for the year following the year in which the deduc
• deductible or creditable taxes accrued on March 31, 1983, after the disallowance based on his 1982 excluded income. Example 7.E is a United States citi
• 1982 that accrue to 1982 foreign earned income, and are therefore subject to disallowance based on excluded income, is $19,091, or $70,000×$45,000/$165,000.
§ 1.911-7 Procedural rules.
• ccount, among other things, the denial of the foreign tax credit for foreign taxes allocable to the excluded income (see §&thnsp;1.911–6(c)). / (Sec. 911 (95 Stat. 194;
controlled foreign corporations
§ 1.960-1 Foreign tax credit with respect to taxes paid on earnings and profits of controlled foreign corporations.
• ings and profits of such foreign corporation and foreign income taxes, if any, attributable to such excluded income. / (iv) This paragraph (c)(1) applies whether or not the first-, second-, or th
PART 1—INCOME TAXES
Special Rules for Determining Capital Gains and Losses
§ 1.1248-4 Limitation on tax applicable to individuals.
• n for taxes. In computing the amount of the deduction allowed under section 164, there shall be excluded income, war profits, or excess profits taxes paid or accrued which are imposed by the autho

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