[Code of Federal Regulations]
[Title 26, Volume 9]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.861-14]

[Page 232]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.861-14  Special rules for allocating and apportioning certain 
expenses (other than interest expense) of an affiliated group of corporations.

    (a)-(c) [Reserved]. For further guidance, see Sec. 1.861-14T(a) 
through (c).
    (d) Definition of affiliated group--(1) General rule. For purposes 
of this section, the term affiliated group has the same meaning as is 
given that term by section 1504, except that section 936 corporations 
(as defined in Sec. 1.861-11(d)(2)(ii)) are also included within the 
affiliated group to the extent provided in paragraph (d)(2) of this 
section. Section 1504(a) defines an affiliated group as one or more 
chains of includible corporations connected through 80-percent stock 
ownership with a common parent corporation which is an includible 
corporation (as defined in section 1504(b)). In the case of a 
corporation that either becomes or ceases to be a member of the group 
during the course of the corporation's taxable year, only the expenses 
incurred by the group member during the period of membership shall be 
allocated and apportioned as if all members of the group were a single 
corporation. In this regard, the apportionment factor chosen shall 
relate only to the period of membership. For example, if apportionment 
on the basis of assets is chosen, the average amount of assets (tax book 
value or fair market value) for the taxable year shall be multiplied by 
a fraction, the numerator of which is the number of months of the 
corporation's taxable year during which the corporation was a member of 
the affiliated group, and the denominator of which is the number of 
months within the corporation's taxable year. If apportionment on the 
basis of gross income is chosen, only gross income generated during the 
period of membership shall be taken into account. If apportionment on 
the basis of units sold or sales receipts is chosen, only units sold or 
sales receipts during the period of membership shall be taken into 
account. Expenses incurred by the group member during its taxable year, 
but not during the period of membership, shall be allocated and 
apportioned without regard to other members of the group. This paragraph 
(d)(1) applies to taxable years beginning after December 31, 1989.
    (2) Inclusion of section 936 corporations--(i) General rule. Except 
as otherwise provided in paragraph (d)(2)(ii) of this section, the 
exclusion from the affiliated group of section 936 corporations under 
section 1504(b)(4) does not apply for purposes of this section. Thus, a 
section 936 corporation that meets the ownership requirements of section 
1504(a) is a member of the affiliated group.
    (ii) Exception for purposes of alternative minimum tax. The 
exclusion from the affiliated group of section 936 corporations under 
section 1504(b)(4) shall be operative for purposes of the application of 
this section solely in determining the amount of foreign source 
alternative minimum taxable income within each separate category and the 
alternative minimum tax foreign tax credit pursuant to section 59(a). 
Thus, a section 936 corporation that meets the ownership requirements of 
section 1504(a) is not a member of the affiliated group for purposes of 
determining the amount of foreign source alternative minimum taxable 
income within each separate category and the alternative minimum tax 
foreign tax credit pursuant to section 59(a).
    (iii) Effective date. This paragraph (d)(2) applies to taxable years 
beginning after December 31, 1989.
    (d)(3)-(j) [Reserved]. For further guidance, see Sec. 1.861-
14T(d)(3) through (j).

[T.D. 8916, 66 FR 274, Jan. 3, 2001]