[Code of Federal Regulations]
[Title 26, Volume 10]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.953-6]

[Page 241]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.953-6  Relationship of sections 953 and 954.

    (a) Priority of application. For purposes of determining the subpart 
F income of a controlled foreign corporation under section 952 for any 
taxable year, the provisions of section 954, relating to foreign base 
company income, shall be applied, after first applying section 953, only 
with respect to income which is not income derived from the insurance of 
United States risks under section 953. For example, the provisions of 
section 954 may be applied with respect to the income of a controlled 
foreign corporation which is not income derived from the insurance of 
United States risks under section 953 because such corporation does not 
satisfy the 5-percent minimum premium requirement prescribed in 
paragraph (b) of Sec. 1.953-1, even though such corporation has taxable 
income, as determined under Sec. 1.953-4, which is attributable to the 
reinsuring or the issuing of any insurance or annuity contracts in 
connection with United States risks. In addition, the provisions of 
section 954 may apply with respect to the income of a controlled foreign 
corporation to the extent such income is not allocated or apportioned 
under Sec. 1.953-4 to the insurance of United States risks.
    (b) Decrease in income not material. It is not material that the 
income of a controlled foreign corporation is decreased as a result of 
the application of paragraph (a) of this section. Thus, in applying 
Sec. 1.953-4 to the income of a controlled foreign corporation 
described in paragraph (c)(2) of Sec. 1.953-5 which would, but for 
paragraph (a) of this section, be subject to the provisions of section 
954, there shall be allowed, in determining the taxable income derived 
from the insurance of United States risks under Sec. 1.953-4, a 
deduction under section 809(a)(1) for the share of each and every item 
of investment yield set aside for policyholders; it is not material that 
in determining foreign base company income such deduction would not be 
allowed under section 954(b)(5). Further, income of a controlled foreign 
corporation which is required to be taken into account under section 953 
in determining income derived from the insurance of United States risks 
and would, but for the provisions of paragraph (a) of this section, 
constitute foreign base company income under section 954 shall not be 
taken into account under section 954(b)(3)(B) in determining whether 
foreign base company income exceeds 70 percent of gross income for the 
taxable year.
    (c) Increase in income not material. It is not material that the 
income of a controlled foreign corporation is increased as a result of 
the application of paragraph (a) of this section. Thus, in applying 
Sec. 1.953-4 to income of a controlled foreign corporation which would, 
but for paragraph (a) of this section, be subject to the provisions of 
section 954, it is not material that the dividends, interest, and gains 
from the sale or exchange of stock or securities derived from certain 
investments which would not be included in foreign personal holding 
company income under section 954(c)(3)(B) are included under section 953 
in income derived from the insurance of United States risks. Further, 
income of a controlled foreign corporation which is required to be taken 
into account under section 953 in determining income derived from the 
insurance of United States risks and would, but for paragraph (a) of 
this section, constitute foreign base company income shall not be 
excluded under section 954(b)(3)(A) for the taxable year.

[T.D. 6781, 29 FR 18212, Dec. 23, 1964]

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