[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: 26CFR1.992-4]

[Page 650-651]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.992-4  Coordination with personal holding company provisions in 
case of certain produced film rents.

    (a) In general. Section 992(d)(2) provides that a personal holding 
company is not eligible to be treated as a DISC. Section 543(a)(5)(B) 
provides that, for purposes of section 543, the term ``produced film 
rents'' means payments received with respect to an interest in a film 
for the use of, or the right to use, such film, but only to the extent 
that such interest was acquired before substantial completion of 
production of such film. Under section 992(e), if such produced film 
rents are included in the ordinary gross income (as defined in

[[Page 651]]

section 543(b)(1)) of a qualified subsidiary for a taxable year of such 
subsidiary, and such interest was acquired by such subsidiary from its 
parent, such interest is deemed (for purposes of the application of 
sections 541, 543(b)(1), and 992(d)(2), and Sec. 1.992-1(f) for such 
taxable year) to have been acquired by such subsidiary at the time such 
interest was acquired by such parent. Thus, for example, if a parent 
acquires an interest in a film before it is substantially completed, 
then substantially completes such film prior to transferring an interest 
in such motion picture to a qualified subsidiary, the qualified 
subsidiary is considered as having acquired such interest prior to 
substantial completion of such motion picture for purposes of 
determining whether payments from the rental of such motion picture will 
be classified as produced film rents of such subsidiary. The provisions 
of section 992(e) and this section are not applicable in determining 
whether payments received with respect to an interest in a film are 
included in the ordinary gross income of a parent or a qualified 
subsidiary. Thus, even though a qualified subsidiary is treated pursuant 
to this section as having acquired an interest in a film at the time 
such interest was acquired by such subsidiary's parent, payments 
received by such parent with respect to such interest prior to the 
transfer of such interest to such subsidiary are includible in the 
ordinary gross income of such parent and not includible in the ordinary 
gross income of such subsidiary.
    (b) Definitions--(1) Qualified subsidiary. For purposes of this 
section, a corporation is a qualified subsidiary for a taxable year if--
    (i) Such corporation was established for the purpose of becoming a 
DISC,
    (ii) Such corporation would qualify (or be treated) as a DISC for 
such taxable year if it is not a personal holding company, and
    (iii) On every day of such taxable year on which shares of such 
corporation are outstanding, at least 80 percent of such shares are held 
directly by a second corporation.
    (2) Parent. For purposes of this section, the term ``parent'' means 
a second corporation referred to in subparagraph (1)(iii) of this 
paragraph.

[T.D. 7323, 39 FR 34409, Sept. 25, 1974]