[Code of Federal Regulations] [Title 26, Volume 1] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR1.0-1] [Page 5-9] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY PART 1_INCOME TAXES--Table of Contents Sec. 1.0-1 Internal Revenue Code of 1954 and regulations. Sec. 1.0-1 Internal Revenue Code of 1954 and regulations. Normal Taxes and Surtaxes DETERMINATION OF TAX LIABILITY Tax on Individuals 1.1-1 Income tax on individuals. 1.1-2 Limitation on tax. 1.1-3 Change in rates applicable to taxable year. 1.1(h)-1 Capital gains look-through rule for sales or exchanges of interests in a partnership, S corporation, or trust. 1.1(i)-1T Questions and answers relating to the tax on unearned income certain minor children (Temporary). 1.2-1 Tax in case of joint return of husband and wife or the return of a surviving spouse. 1.2-2 Definitions and special rules. 1.3-1 Application of optional tax. 1.4-1 Number of exemptions. 1.4-2 Elections. 1.4-3 Husband and wife filing separate returns. 1.4-4 Short taxable year caused by death. Tax on Corporations 1.11-1 Tax on corporations. Changes in Rates During a Taxable Year 1.21-1 Changes in rate during a taxable year. 1.23-1 Residential energy credit. 1.23-2 Definitions. 1.23-3 Special rules. 1.23-4 Performance and quality standards. [Reserved] 1.23-5 Certification procedures. 1.23-6 Procedure and criteria for additions to the approved list of energy-conserving components or renewable energy sources. 1.25-1T Credit for interest paid on certain home mortgages (Temporary). 1.25-2T Amount of credit (Temporary). 1.25-3 Qualified mortgage credit certificate. 1.25-3T Qualified mortgage credit certificate (Temporary). 1.25-4T Qualified mortgage credit certificate program (Temporary). 1.25-5T Limitation on aggregate amount of mortgage credit certificates (Temporary). 1.25-6T Form of qualified mortgage credit certificate (Temporary). 1.25-7T Public notice (Temporary). 1.25-8T Reporting requirements (Temporary). 1.25A-0 Table of contents. 1.25A-1 Calculation of education tax credit and general eligibility requirements. 1.25A-2 Definitions. 1.25A-3 Hope Scholarship Credit. 1.25A-4 Lifetime Learning Credit. 1.25A-5 Special rules relating to characterization and timing of payments. 1.28-0 Credit for clinical testing expenses for certain drugs for rare diseases or conditions; table of contents. 1.28-1 Credit for clinical testing expenses for certain drugs for rare diseases or conditions. Credits Against Tax credits allowable under sections 30 through 45D 1.30-1 Definition of qualified electric vehicle and recapture of credit for qualified electric vehicle. 1.31-1 Credit for tax withheld on wages. 1.31-2 Credit for ``special refunds'' of employee social security tax. 1.32-2 Earned income credit for taxable years beginning after December 31, 1978. 1.32-3 Eligibility requirements after denial of the earned income credit. 1.34-1 Credit against tax and exclusion from gross income in case of dividends received by individuals. 1.34-2 Limitations on amount of credit. 1.34-3 Dividends to which the credit and exclusion apply. 1.34-4 Taxpayers not entitled to credit and exclusion. 1.34-5 Effective date; taxable years ending after July 31, 1954, subject to the Internal Revenue Code of 1939. 1.34-6 Dividends received after December 31, 1964. 1.35-1 Partially tax-exempt interest received by individuals. 1.35-2 Taxpayers not entitled to credit. 1.37-1 General rules for the credit for the elderly. 1.37-2 Credit for individuals age 65 or over. 1.37-3 Credit for individuals under age 65 who have public retirement system income. 1.38-1 Investment in certain depreciable property. 1.40-1 Questions and answers relating to the meaning of the term ``qualified mixture'' in section 40(b)(1). 1.41-0 Table of contents. 1.41-1 Credit for increasing research activities. 1.41-2 Qualified Research Expenses. [[Page 6]] 1.41-3 Base amount for taxable years beginning on or after January 3, 2001. 1.41-4 Qualified research for expenditures paid or incurred in taxable years ending on or after December 31, 2003. 1.41-4A Qualified research for taxable years beginning before January 1, 1986. 1.41-5 Basic research for taxable years beginning after December 31, 1986. [Reserved] 1.41-5A Basic research for taxable years beginning before January 1, 1987. 1.41-6 Aggregation of expenditures. 1.41-7 Special rules. 1.41-8 Special rules for taxable years ending on or after January 3, 2001. 1.42-0 Table of contents. 1.42-1 Limitation on low-income housing credit allowed with respect to qualified low-income buildings receiving housing credit allocations from a State or local housing credit agency. 1.42-1T Limitation on low-income housing credit allowed with respect to qualified low-income buildings receiving housing credit allocations from a State or local housing credit agency (temporary). 1.42-2 Waiver of requirement that an existing building eligible for the low-income housing credit was last placed in service more than 10 years prior to acquisition by the taxpayer. 1.42-3 Treatment of buildings financed with proceeds from a loan under an Affordable Housing Program established pursuant to section 721 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). 1.42-4 Application of not-for-profit rules of section 183 to low-income housing credit activities. 1.42-5 Monitoring compliance with low-income housing credit requirements. 1.42-6 Buildings qualifying for carryover allocations. 1.42-7 Substantially bond-financed buildings. [Reserved] 1.42-8 Election of appropriate percentage month. 1.42-9 For use by the general public. 1.42-10 Utility allowances. 1.42-11 Provision of services. 1.42-12 Effective dates and transitional rules. 1.42-13 Rules necessary and appropriate; housing credit agencies' correction of administrative errors and omissions. 1.42-14 Allocation rules for post-2000 State housing credit ceiling amount. 1.42-15 Available unit rule. 1.42-16 Eligible basis reduced by federal grants. 1.42-17 Qualified allocation plan. 1.42A-1 General tax credit for taxable years ending after December 31, 1975, and before January 1, 1979. 1.43-0 Table of contents. 1.43-1 The enhanced oil recovery credit--general rules. 1.43-2 Qualified enhanced oil recovery project. 1.43-3 Certification. 1.43-4 Qualified enhanced oil recovery costs. 1.43-5 At-risk limitation. [Reserved] 1.43-6 Election out of section 43. 1.43-7 Effective date of regulations. 1.44-1 Allowance of credit for purchase of new principal residence after March 12, 1975, and before January 1, 1977. 1.44-2 Property to which credit for purchase of new principal residence applies. 1.44-3 Certificate by seller. 1.44-4 Recapture for certain dispositions. 1.44-5 Definitions. 1.44A-1 Expenses for household and dependent care services necessary for gainful employment. 1.44A-2 Limitations on amount creditable. 1.44A-3 Special rules applicable to married individuals. 1.44A-4 Other special rules relating to employment-related expenses. 1.44B-1 Credit for employment of certain new employees. Research Credit--For Taxable Years Beginning Before January 1, 1990 1.41-0A Table of contents. 1.41-3A Base period research expense. rules for computing credit for investment in certain depreciable property 1.45D-1T New markets tax credit (temporary). 1.46-1 Determination of amount. 1.46-2 Carryback and carryover of unused credit. 1.46-3 Qualified investment. 1.46-4 Limitations with respect to certain persons. 1.46-5 Qualified progress expenditures. 1.46-6 Limitation in case of certain regulated companies. 1.46-7 Statutory provisions; plan requirements for taxpayers electing additional investment credit, etc. 1.46-8 Requirements for taxpayers electing additional one-percent investment credit (TRASOP's). 1.46-9 Requirements for taxpayers electing an extra one-half percent additional investment credit. 1.46-10 [Reserved] 1.46-11 Commuter highway vehicles. 1.47-1 Recomputation of credit allowed by section 38. 1.47-2 ``Disposition'' and ``cessation''. 1.47-3 Exceptions to the application of Sec. 1.47-1. 1.47-4 Electing small business corporation. 1.47-5 Estates and trusts. 1.47-6 Partnerships. 1.48-1 Definition of section 38 property. [[Page 7]] 1.48-2 New section 38 property. 1.48-3 Used section 38 property. 1.48-4 Election of lessor of new section 38 property to treat lessee as purchaser. 1.48-5 Electing small business corporations. 1.48-6 Estates and trusts. 1.48-9 Definition of energy property. 1.48-10 Single purpose agricultural or horticultural structures. 1.48-11 Qualified rehabilitated building; expenditures incurred before January 1, 1982. 1.48-12 Qualified rehabilitated building; expenditures incurred after December 31, 1981. 1.50-1 Restoration of credit. rules for computing credit for expenses of work incentive programs 1.50A-1 Determination of amount. 1.50A-2 Carryback and carryover of unused credit. 1.50A-3 Recomputation of credit allowed by section 40. 1.50A-4 Exceptions to the application of Sec. 1.50A-3. 1.50A-5 Electing small business corporations. 1.50A-6 Estates and trusts. 1.50A-7 Partnerships. 1.50B-1 Definitions of WIN expenses and WIN employees. 1.50B-2 Electing small business corporations. 1.50B-3 Estates and trusts. 1.50B-4 Partnerships. 1.50B-5 Limitations with respect to certain persons. 1.51-1 Amount of credit. Tax Surcharge 1.52-1 Trades or businesses that are under common control. 1.52-2 Adjustments for acquisitions and dispositions. 1.52-3 Limitations with respect to certain persons. 1.53-1 Limitation based on amount of tax. 1.53-2 Carryback and carryover of unused credit. 1.53-3 Separate rule for pass-through of jobs credit. 1.55-1 Alternative minimum taxable income. 1.56-0 Table of contents to Sec. 1.56-1, adjustment for book income of corporations. 1.56-1 Adjustment for the book income of corporations. Regulations Applicable to Taxable Years Beginning in 1969 and Ending in 1970 1.56A-1 Imposition of tax. 1.56A-2 Deferral of tax liability in case of certain net operating losses. 1.56A-3 Effective date. 1.56A-4 Certain taxpayers. 1.56A-5 Tax carryovers. 1.56(g)-0 Table of contents. 1.56(g)-1 Adjusted current earnings. Tax Preference Regulations 1.57-0 Scope. 1.57-1 Items of tax preference defined. 1.57-2--1.57-3 [Reserved] 1.57-4 Limitation on amounts treated as items of tax preference for taxable years beginning before January 1, 1976. 1.57-5 Records to be kept. 1.58-1 Minimum tax exemption. 1.58-2 General rules for conduit entities; partnerships and partners. 1.58-3 Estates and trusts. 1.58-3T Treatment of non-alternative tax itemized deductions by trusts and estates and their beneficiaries in taxable years beginning after December 31, 1982 (temporary). 1.58-4 Electing small business corporations. 1.58-5 Common trust funds. 1.58-6 Regulated investment companies; real estate investment trusts. 1.58-7 Tax preferences attributable to foreign sources; preferences other than capital gains and stock options. 1.58-8 Capital gains and stock options. 1.58-9 Application of the tax benefit rule to the minimum tax for taxable years beginning prior to 1987. 1.59-1.60 [Reserved] Authority: 26 U.S.C 7805, unless otherwise noted. Section 1.1(h)-1 also issued under 26 U.S.C. 1(h). Sections 1.23-1--1.23-6 also issued under 26 U.S.C. 23; Section 1.25-1T also issued under 26 U.S.C. 25. Section 1.25-2T also issued under 26 U.S.C. 25. Section 1.25-3 also issued under 26 U.S.C. 25. Section 1.25-3T also issued under 26 U.S.C. 25. Section 1.25-4T also issued under 26 U.S.C. 25. Section 1.25-5T also issued under 26 U.S.C. 25. Section 1.25-6T also issued under 26 U.S.C. 25. Section 1.25-7T also issued under 26 U.S.C. 25. Section 1.25-8T also issued under 26 U.S.C. 25. Section 1.25A-1 also issued under section 26 U.S.C. 25A(i). Section 1.25A-2 also issued under section 26 U.S.C. 25A(i). Section 1.25A-3 also issued under section 26 U.S.C. 25A(i). Section 1.25A-4 also issued under section 26 U.S.C. 25A(i). [[Page 8]] Section 1.25A-5 also issued under section 26 U.S.C. 25A(i). Section 1.28-0 also issued under 26 U.S.C. 28(d)(5); Section 1.28-1 also issued under 26 U.S.C. 28(d)(5); Section 1.30-1 also issued under 26 U.S.C. 30(d)(2); Section 1.42-1 also issued under 26 U.S.C. 42(n); Sections 1.42-1T and 1.42-2T also issued under 26 U.S.C. 42(m); Section 1.42-2 also issued under 26 U.S.C. 42(m); Section 1.42-3 also issued under 26 U.S.C. 42(n); Section 1.42-4 also issued under 26 U.S.C. 42(n); Section 1.42-5 also issued under 26 U.S.C. 42(n); Sections 1.42-6, 1.42-8, 1.42-9, 1.42-10, 1.42-11, and 1.42-12, also issued under 26 U.S.C. 42(n); Section 1.42-13 also issued under 26 U.S.C. 42(n); Section 1.42-14 also issued under 26 U.S.C. 42(n); Section 1.42-15 also issued under 26 U.S.C. 42(n); Section 1.42-16 also issued under 26 U.S.C. 42(n); Section 1.42-17 also issued under 26 U.S.C. 42(n); Sections 1.43-0--1.43-7 also issued under section 26 U.S.C. 43; Section 1.45D-1T also issued under 26 U.S.C. 45D(i); Section 1.46-5 also issued under 26 U.S.C. 46(d)(6) and 26 U.S.C. 47(a)(3)(C); Section 1.46-6 also issued under 26 U.S.C. 46(f)(7); Section 1.47-1 also issued under 26 U.S.C. 47(a); Section 1.48-9 also issued under 26 U.S.C. 38(b) (as in effect before the amendments made by subtitle F of the Tax Reform Act of 1984); Sections 1.50A--1.50B also issued under 85 Stat. 553 (26 U.S.C. 40(b)); Section 1.52-1 also issued under 26 U.S.C. 52(b); Section 1.56-1 also issued under 26 U.S.C. 56(f)(2)(H); Section 1.56(g)-1 also issued under section 7611(g)(3) of the Omnibus Budget Reconciliation Act of 1989 (Pub. L. 101-239, 103 Stat. 2373); and Section 1.58-9 also issued under 26 U.S.C. 58(h). Source: T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960, unless otherwise noted. (a) Enactment of law. The Internal Revenue Code of 1954 which became law upon enactment of Public Law 591, 83d Congress, approved August 16, 1954, provides in part as follows: Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) Citation. (1) The provisions of this Act set forth under the heading ``Internal Revenue Title'' may be cited as the ``Internal Revenue Code of 1954'' (2) The Internal Revenue Code enacted on February 10, 1939, as amended, may be cited as the ``Internal Revenue Code of 1939''. (b) Publication. This Act shall be published as volume 68A of the United States Statutes at Large, with a comprehensive table of contents and an appendix; but without an index or marginal references. The date of enactment, bill number, public law number, and chapter number, shall be printed as a headnote. (c) Cross reference. For saving provisions, effective date provisions, and other related provisions, see chapter 80 (sec. 7801 and following) of the Internal Revenue Code of 1954. (d) Enactment of Internal Revenue Title into law. The Internal Revenue Title referred to in subsection (a)(1) is as follows: * * * * * In general, the provisions of the Internal Revenue Code of 1954 are applicable with respect to taxable years beginning after December 31, 1953, and ending after August 16, 1954. Certain provisions of that Code are deemed to be included in the Internal Revenue Code of 1939. See section 7851. (b) Scope of regulations. The regulations in this part deal with (1) the income taxes imposed under subtitle A of the Internal Revenue Code of 1954, and (2) certain administrative provisions contained in subtitle F of such Code relating to such taxes. In general, the applicability of such regulations is commensurate with the applicability of the respective provisions of the Internal Revenue Code of 1954 except that with respect to the provisions of the Internal Revenue Code of 1954 which are deemed to be included in the Internal Revenue Code of 1939, the regulations relating to such provisions are applicable to certain fiscal years and short taxable years which are subject to the Internal Revenue Code of 1939. Those provisions of the regulations which are applicable to taxable years subject to the Internal Revenue Code of 1939 and the specific taxable years to which such provisions are so applicable are identified in each instance. The regulations in 26 CFR (1939) part 39 (Regulations 118) are continued in effect until superseded by the regulations in this part. See Treasury Decision 6091, approved August 16, 1954 (19 FR 5167, C.B. 1954-2, 47). [[Page 9]] Normal Taxes and Surtaxes DETERMINATION OF TAX LIABILITY Tax on Individuals