[Code of Federal Regulations] [Title 26, Volume 13] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR] [Page 56-57] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) RELATED RULES--Table of Contents Sec. 1.1564-1 Limitations on additional benefits for members of controlled groups. (a) In general. Section 1564(a)(1) provides that, with respect to any December 31 after 1969 and before 1975, only one component member of a controlled group of corporations (as defined in section 1563(a)) shall be allowed the full amount of: (1) The $25,000 surtax exemption under section 1562 (relating to election of multiple surtax exemptions), (2) The $100,000 amount under section 535(c) (2) and (3) (relating to the accumulated earnings credit), and (3) The $25,000 limitation on the small business deduction of life insurance companies under sections 804(a)(4) and 809(d)(10). The amounts otherwise allowed to the other component members of such controlled group for their taxable years which include such December 31 shall be reduced to the amounts set forth in the following schedule: ------------------------------------------------------------------------ Amount Small Surtax under sec. business Taxable years including-- exemption 535(c) (2) deduction and (3) limitation ------------------------------------------------------------------------ Dec. 31, 1970....................... $20,833 $83,333 $20,833 Dec. 31, 1971....................... 16,667 66,667 16,667 Dec. 31, 1972....................... 12,500 50,000 12,500 Dec. 31, 1973....................... 8,333 33,333 8,333 Dec. 31, 1974....................... 4,167 16,667 4,167 ------------------------------------------------------------------------ (b) Election. (1) Section 1564(a)(2) provides that, with respect to any December 31 after 1969 and before 1975, the component members of a controlled group of corporations shall elect which component member or members of such group shall be allowed for their taxable years which includes such December 31 the full amounts described in paragraph (a) (1), (2), and (3) of this section. In making such election, the members may allocate such full amounts among themselves in any manner they choose. For example, the group may select one of its members to receive the full amount of the $25,000 surtax exemption under section 1562 and another of its members to receive the full $100,000 amount under section 535(c)(2), or it may select one of its members to claim both, such full amounts. (2) The election shall be made with respect to a particular December 31 and shall be valid only if each corporation which is a component member of the controlled group on such December 31 gives its consent. The consents shall be made by means of a statement, signed by persons duly authorized to act on behalf of each of the component members (other than wholly owned subsidiaries), stating which member has been selected to receive the amount which is not reduced under paragraph (a) of this section. The member so selected shall attach the statement to its income tax [[Page 57]] return for the taxable year including such December 31. The statement shall set forth the name, address, employer identification number, and taxable years of each of the other component members (including wholly owned subsidiaries) of the controlled group. Such other members shall attach a copy of the statement to their income tax returns for their taxable years including such December 31. An election plan adopted by a controlled group with respect to a particular December 31 shall be valid only for the taxable year of each member of the group which includes such December 31. (3) Each component member of a controlled group which is a wholly owned subsidiary of such group with respect to a December 31 shall be deemed to consent to an election with respect to such December 31, provided each component member of the group which is not a wholly owned subsidiary consents to the election plan. A component member of a controlled group shall be considered to be a wholly owned subsidiary of the group with respect to a December 31 if, on each day preceding such date during its taxable year which includes such date, all of its stock is owned directly by one or more corporations which are component members of the group on such December 31. [T.D. 7181, 37 FR 8071, Apr. 25, 1972]