[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.826-5]

[Page 729-730]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Determination of Tax Liability--Table of Contents
 
Sec. 1.826-5  Attribution of tax.

    (a) In general. Section 826(e) provides that a reciprocal making the 
election allowed by section 826(a) shall be credited with so much of the 
tax paid by the attorney-in-fact as is attributable to the income 
received by the attorney-in-fact from the reciprocal in such taxable 
year.
    (b) Computation. For purposes of section 826(e) and paragraph (a) of 
this section, the amount of tax attributable to income received by the 
attorney-in-

[[Page 730]]

fact from the reciprocal in the taxable year shall be computed in the 
following manner:
    (1) First, compute the taxable income (if any) from each source of 
gross income set forth in paragraph (b)(2) of Sec. 1.826-3 by deducting 
from each such amount the expenses allocable thereto under Sec. 1.826-
4;
    (2) Second, compute the normal tax on each amount of taxable income 
computed in subparagraph (1) of this paragraph at the rate provided by 
section 11(b) of the Code;
    (3) Third, deduct from each amount determined in subparagraph (1) of 
this paragraph an amount which bears the same proportion to the surtax 
exemption provided by section 11(c) of the Code as each amount computed 
under subparagraph (1) of this paragraph bears to the total of the 
amounts computed under subparagraph (1) of this paragraph;
    (4) Fourth, compute the surtax on each remainder computed in 
subparagraph (3) of this paragraph at the rate provided by section 11(c) 
of the Code;
    (5) Fifth, add the normal tax computed under subparagraph (2) of 
this paragraph to the surtax computed under subparagraph (4) of this 
paragraph for each amount computed under subparagraph (1) of this 
paragraph;
    (6) Sixth, deduct from each amount of tax computed under 
subparagraph (5) of this paragraph any tax credits (other than those 
arising from payments made with respect to the tax liability for the 
taxable year or other taxable years) allocable (in the same manner as 
provided for expenses under Sec. 1.826-4) to such amount;
    (7) Seventh, compute that amount which bears the same proportion to 
the tax actually paid with respect to the taxable year as each 
individual amount computed under subparagraph (6) of this paragraph 
bears to the total of the amounts computed under subparagraph (6) of 
this paragraph. The amount so determined with respect to each amount 
computed under subparagraph (6) of this paragraph is the tax paid which 
is attributable to the amount computed under subparagraph (1) of this 
paragraph.

To the extent the amounts determined under subparagraph (1) of this 
paragraph are attributable to amounts received from the reciprocal for 
the taxable year, the tax attributable to such amounts (as determined 
under subparagraph (7) of this paragraph) shall be the amount of tax 
attributable to income received by the attorney-in-fact from the 
reciprocal during the taxable year.
    (c) Taxes of attorney-in-fact unaffected. Nothing in section 826 or 
the regulations thereunder shall increase or decrease the taxes imposed 
on the income of the attorney-in-fact.

[T.D. 6681, 28 FR 11126, Oct. 17, 1963]