[Code of Federal Regulations] [Title 26, Volume 9] [Revised as of April 1, 2006] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR1.851-1] [Page 5-10] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) PART 1_INCOME TAXES--Table of Contents Sec. 1.851-1 Definition of regulated investment company. Normal Taxes and Surtaxes Regulated Investment Companies and Real Estate Investment Trusts Sec. 1.851-1 Definition of regulated investment company. 1.851-2 Limitations. 1.851-3 Rules applicable to section 851(b)(4). 1.851-4 Determination of status. 1.851-5 Examples. 1.851-6 Investment companies furnishing capital to development corporations. 1.851-7 Certain unit investment trusts. 1.852-1 Taxation of regulated investment companies. 1.852-2 Method of taxation of regulated investment companies. 1.852-3 Investment company taxable income. 1.852-4 Method of taxation of shareholders of regulated investment companies. 1.852-5 Earnings and profits of a regulated investment company. 1.852-6 Records to be kept for purpose of determining whether a corporation claiming to be a regulated investment company is a personal holding company. 1.852-7 Additional information required in returns of shareholders. 1.852-8 Information returns. 1.852-9 Special procedural requirements applicable to designation under section 852(b)(3)(D). 1.852-10 Distributions in redemption of interests in unit investment trusts. 1.852-11 Treatment of certain losses attributable to periods after October 31 of a taxable year. 1.852-12 Non-RIC earnings and profits. 1.853-1 Foreign tax credit allowed to shareholders. 1.853-2 Effect of election. 1.853-3 Notice to shareholders. 1.853-4 Manner of making election. 1.854-1 Limitations applicable to dividends received from regulated investment company. 1.854-2 Notice to shareholders. 1.854-3 Definitions. 1.855-1 Dividends paid by regulated investment company after close of taxable year. Real Estate Investment Trusts 1.856-0 Revenue Act of 1978 amendments not included. 1.856-1 Definition of real estate investment trust. 1.856-2 Limitations. 1.856-3 Definitions. 1.856-4 Rents from real property. 1.856-5 Interest. 1.856-6 Foreclosure property. 1.856-7 Certain corporations, etc., that are considered to meet the gross income requirements. 1.856-8 Revocation or termination of election. 1.856-9 Treatment of certain qualified REIT subsidiaries. 1.857-1 Taxation of real estate investment trusts. 1.857-2 Real estate investment trust taxable income and net capital gain. 1.857-3 Net income from foreclosure property. 1.857-4 Tax imposed by reason of the failure to meet certain source-of- income requirements. 1.857-5 Net income and loss from prohibited transactions. 1.857-6 Method of taxation of shareholders of real estate investment trusts. 1.857-7 Earnings and profits of a real estate investment trust. 1.857-8 Records to be kept by a real estate investment trust. 1.857-9 Information required in returns of shareholders. 1.857-10 Information returns. 1.857-11 Non-REIT earnings and profits. 1.858-1 Dividends paid by a real estate investment trust after close of taxable year. 1.860-1 Deficiency dividends. 1.860-2 Requirements for deficiency dividends. 1.860-3 Interest and additions to tax. 1.860-4 Claim for credit or refund. 1.860-5 Effective date. 1.860A-0 Outline of REMIC provisions. 1.860A-1 Effective dates and transition rules. 1.860C-1 Taxation of holders of residual interests. 1.860C-2 Determination of REMIC taxable income or net loss. 1.860D-1 Definition of a REMIC. 1.860E-1 Treatment of taxable income of a residual interest holder in excess of daily accruals. 1.860E-2 Tax on transfers of residual interests to certain organizations. 1.860F-1 Qualified liquidations. 1.860F-2 Transfers to a REMIC. 1.860F-4 REMIC reporting requirements and other administrative rules. 1.860G-1 Definition of regular and residual interests. 1.860G-2 Other rules. 1.860G-3 Treatment of foreign persons. [[Page 6]] TAX BASED ON INCOME FROM SOURCES WITHIN OR WITHOUT THE UNITED STATES Determination of Sources of Income 1.861-1 Income from sources within the United States. 1.861-2 Interest. 1.861-3 Dividends. 1.861-3T Dividends (temporary). 1.861-4 Compensation for labor or personal services. 1.861-5 Rentals and royalties. 1.861-6 Sale of real property. 1.861-7 Sale of personal property. 1.861-8 Computation of taxable income from sources within the United States and from other sources and activities. 1.861-8T Computation of taxable income from sources within the United States and from other sources and activities (temporary). 1.861-9 Allocation and apportionment of interest expense. 1.861-9T Allocation and apportionment of interest expense (temporary). 1.861-10 Special allocations of interest expense. 1.861-10T Special allocations of interest expense (temporary regulations). 1.861-11 Special rules for allocating and apportioning interest expense of an affiliated group of corporations. 1.861-11T Special rules for allocating and apportioning interest expense of an affiliated group of corporations (temporary regulations). 1.861-12T Characterization rules and adjustments for certain assets (temporary regulations). 1.861-13T Transition rules for interest expenses (temporary regulations). 1.861-14 Special rules for allocating and apportioning certain expenses (other than interest expense) of an affiliated group of corporations. 1.861-14T Special rules for allocating and apportioning certain expenses (other than interest expense) of an affiliated group of corporations (temporary regulations). 1.861-15 Income from certain aircraft or vessels first leased on or before December 28, 1980. 1.861-16 Income from certain craft first leased after December 28, 1980. 1.861-17 Allocation and apportionment of research and experimental expenditures. 1.861-18 Classification of transactions involving computer programs. 1.862-1 Income specifically from sources without the United States. 1.863-0 Table of contents. 1.863-1 Allocation of gross income under section 863(a). 1.863-2 Allocation and apportionment of taxable income. 1.863.3 Allocation and apportionment of income from certain sales of inventory. Regulations Applicable to Taxable Years Prior to December 30, 1996 1.863-3A Income from the sale of personal property derived partly from within and partly from without the United States. 1.863-3AT Income from the sale of personal property derived partly from within and partly from without the United States (temporary regulations). 1.863-4 Certain transportation services. 1.863-6 Income from sources within a foreign country. 1.863-7 Allocation of income attributable to certain notional principal contracts under section 863(a). 1.864-1 Meaning of sale, etc. 1.864-2 Trade or business within the United States. 1.864-3 Rules for determining income effectively connected with U.S. business of nonresident aliens or foreign corporations. 1.864-4 U.S. source income effectively connected with U.S. business. 1.864-5 Foreign source income effectively connected with U.S. business. 1.864-6 Income, gain, or loss attributable to an office or other fixed place of business in the United States. 1.864-7 Definition of office or other fixed place of business. 1.864-8T Treatment of related person factoring income (temporary). 1.865-1 Loss with respect to personal property other than stock. 1.865-2 Loss with respect to stock. Nonresident Aliens and Foreign Corporations nonresident alien individuals 1.871-1 Classification and manner of taxing alien individuals. 1.871-2 Determining residence of alien individuals. 1.871-3 Residence of alien seamen. 1.871-4 Proof of residence of aliens. 1.871-5 Loss of residence by an alien. 1.871-6 Duty of withholding agent to determine status of alien payees. 1.871-7 Taxation of nonresident alien individuals not engaged in U.S. business. 1.871-8 Taxation of nonresident alien individuals engaged in U.S. business or treated as having effectively connected income. 1.871-9 Nonresident alien students or trainees deemed to be engaged in U.S. business. 1.871-10 Election to treat real property income as effectively connected with U.S. business. 1.871-11 Gains from sale or exchange of patents, copyrights, or similar property. [[Page 7]] 1.871-12 Determination of tax on treaty income. 1.871-13 Taxation of individuals for taxable year of change of U.S. citizenship or residence. 1.871-14 Rules relating to repeal of tax on interest of nonresident alien individuals and foreign corporations received from certain portfolio debt investments. 1.872-1 Gross income of nonresident alien individuals. 1.872-2 Exclusions from gross income of nonresident alien individuals. 1.873-1 Deductions allowed nonresident alien individuals. 1.874-1 Allowance of deductions and credits to nonresident alien individuals. 1.874-1T Allowance of deductions and credits to nonresident alien individuals (temporary). 1.875-1 Partnerships. 1.875-2 Beneficiaries of estates or trusts. 1.876-1 Alien residents of Puerto Rico, Guam, American Samoa, or the Northern Mariana Islands. 1.876-1T Alien residents of Puerto Rico, Guam, American Samoa, or the Northern Mariana Islands (temporary). 1.879-1 Treatment of community income. foreign corporations 1.881-0 Table of contents. 1.881-1 Manner of taxing foreign corporations. 1.881-2 Taxation of foreign corporations not engaged in U.S. business. 1.881-3 Conduit financing arrangements. 1.881-4 Recordkeeping requirements concerning conduit financing arrangements. 1.881-5 Exception for certain possessions corporations. 1.881-5T Exception for certain possessions corporations (temporary). 1.882-0 Table of contents. 1.882-1 Taxation of foreign corporations engaged in U.S. business or of foreign corporations treated as having effectively connected income. 1.882-2 Income of foreign corporations treated as effectively connected with U.S. business. 1.882-3 Gross income of a foreign corporation. 1.882-4 Allowance of deductions and credits to foreign corporations. 1.882-4T Allowance of deductions and credits to foreign corporations (temporary). 1.882-5 Determination of interest deduction. 1.883-0 Outline of major topics. 1.883-1 Exclusion of income from the international operation of ships or aircraft. 1.883-2 Treatment of publicly-traded corporations. 1.883-3 Treatment of controlled foreign corporations. 1.883-4 Qualified shareholder stock ownership test. 1.883-5 Effective dates. 1.884-0 Overview of regulation provisions for section 884. 1.884-0T Overview of regulation provisions for section 884 (temporary). 1.884-1 Branch profits tax. 1.884-2 Special rules for termination or incorporation of a U.S. trade or business or liquidation or reorganization of a foreign corporation or its domestic subsidiary. 1.884-2T Special rules for termination or incorporation of a U.S. trade or business or liquidation or reorganization of a foreign corporation or its domestic subsidiary (temporary). 1.884-3T Coordination of branch profits tax with second-tier withholding (temporary). [Reserved] 1.884-4 Branch-level interest tax. 1.884-5 Qualified resident. miscellaneous provisions 1.891 Statutory provisions; doubling of rates of tax on citizens and corporations of certain foreign countries. 1.892-1T Purpose and scope of regulations (temporary regulations). 1.892-2T Foreign government defined (temporary regulations). 1.892-3T Income of foreign governments (temporary regulations). 1.892-4T Commercial activities (temporary regulations). 1.892-5 Controlled commercial entity. 1.892-5T Controlled commercial entity (temporary regulations). 1.892-6T Income of international organizations (temporary regulations). 1.892-7T Relationship to other Internal Revenue Code sections (temporary regulations). 1.893-1 Compensation of employees of foreign governments or international organizations. 1.894-1 Income affected by treaty. 1.895-1 Income derived by a foreign central bank of issue, or by Bank for International Settlements, from obligations of the United States or from bank deposits. 1.897-1 Taxation of foreign investment in United States real property interests, definition of terms. 1.897-2 United States real property holding corporations. 1.897-3 Election by foreign corporation to be treated as a domestic corporation under section 897(i). 1.897-4AT Table of contents (temporary). 1987-5 Corporate distributions. 1.897-5T Corporate distributions (temporary). 1.897-6T Nonrecognition exchanges applicable to corporations, their shareholders, and other taxpayers, and certain transfers of property in corporate reorganizations (temporary). [[Page 8]] 1.897-7T Treatment of certain partnership interests as entirely U.S. real property interests under sections 897(g) and 1445(e) (temporary). 1.897-8T Status as a U.S. real property holding corporation as a condition for electing section 897(i) pursuant to Sec. 1.897- 3 (temporary). 1.897-9T Treatment of certain interest in publicly traded corporations, definition of foreign person, and foreign governments and international organizations (temporary). Income From Sources Without the United States foreign tax credit 1.901-1 Allowance of credit for taxes. 1.901-1T Allowance of credit for taxes (temporary). 1.901-2 Income, war profits, or excess profits tax paid or accrued. 1.901-2A Dual capacity taxpayers. 1.901-3 Reduction in amount of foreign taxes on foreign mineral income allowed as a credit. 1.902-0 Outline of regulations provisions for section 902. 1.902-1 Credit for domestic corporate shareholder of a foreign corporation for foreign income taxes paid by the foreign corporation. 1.902-2 Treatment of deficits in post-1986 undistributed earnings and pre-1987 accumulated profits of a first-, second-, or third- tier corporation for purposes of computing an amount of foreign taxes deemed paid under Sec. 1.902-1. 1.902-3 Credit for domestic corporate shareholder of a foreign corporation for foreign income taxes paid with respect to accumulated profits of taxable years of the foreign corporation beginning before January 1, 1987. 1.902-4 Rules for distributions attributable to accumulated profits for taxable years in which a first-tier corporation was a less developed country corporation. 1.903-1 Taxes in lieu of income taxes. 1.904-0 Outline of regulation provisions for section 904. 1.904-1 Limitation on credit for foreign taxes. 1.904-2 Carryback and carryover of unused foreign tax. 1.904-3 Carryback and carryover of unused foreign tax by husband and wife. 1.904-4 Separate application of section 904 with respect to certain categories of income. 1.904-5 Look-through rules as applied to controlled foreign corporations and other entities. 1.904-6 Allocation and apportionment of taxes. 1.904-7 Transition rules. 1.904(b)-1 Special rules for capital gains and losses. 1.904(b)-2 Special rules for application of section 904(b) to alternative minimum tax foreign tax credit. 1.904(f)-1 Overall foreign loss and the overall foreign loss account. 1.904(f)-2 Recapture of overall foreign losses. 1.904(f)-3 Allocation of net operating losses and net capital losses. 1.904(f)-4 Recapture of foreign losses out of accumulation distributions from a foreign trust. 1.904(f)-5 Special rules for recapture of overall foreign losses of a domestic trust. 1.904(f)-6 Transitional rule for recapture of FORI and general limitation overall foreign losses incurred in taxable years beginning before January 1, 1983, from foreign source taxable income subject to the general limitation in taxable years beginning after December 31, 1982. 1.904(f)-7--1.904(f)-11 [Reserved] 1.904(f)-12 Transition rules. 1.904(i)-1 Limitation on use of deconsolidation to avoid foreign tax credit limitations. 1.904(j)-1 Certain individuals exempt from foreign tax credit limitations. 1.905-1 When credit for taxes may be taken. 1.905-2 Conditions of allowance of credit. 1.905-3T Adjustments to the pools of foreign taxes and earnings and profits when the allowable foreign tax credit changes (temporary). 1.905-4T Notification and redetermination of United States tax liability (temporary). 1.905-5T Foreign tax redeterminations and currency translation rules for foreign tax redeterminations occurring in taxable years beginning prior to January 1, 1987 (temporary). 1.907-0 Outline of regulation provisions for section 907. 1.907(a)-0 Introduction (for taxable years beginning after December 31, 1982). 1.907(a)-1 Reduction in taxes paid on FOGEI (for taxable years beginning after December 31, 1982). 1.907(b)-1 Reduction of creditable FORI taxes (for taxable years beginning after December 31, 1982). 1.907(c)-1 Definitions relating to FOGEI and FORI (for taxable years beginning after December 31, 1982). 1.907(c)-2 Section 907(c)(3) items (for taxable years beginning after December 31, 1982). 1.907(c)-3 FOGEI and FORI taxes (for taxable years beginning after December 31, 1982). 1.907(d)-1 Disregard of posted prices for purposes of chapter 1 of the Code (for taxable years beginning after December 31, 1982). 1.907(e)-1 [Reserved]. [[Page 9]] 1.907(f)-1 Carryback and carryover of credits disallowed by section 907(a) (for amounts carried between taxable years that each begin after December 31, 1982). Authority: 26 U.S.C. 7805. Section 1.852-11 is also issued under 26 U.S.C. 852(b)(3)(C), 852(b)(8), and 852(c). Section 1.860D-1 also issued under 26 U.S.C. 860G(e). Section 1.860E-1 also issued under 26 U.S.C. 860E and 860G(e). Section 1.860E-2 also issued under 26 U.S.C. 860E(e). Section 1.860F-2 also issued under 26 U.S.C. 860G(e). Section 1.860F-4 also issued under 26 U.S.C. 860G(e) and 26 U.S.C. 6230(k). Section 1.860F-4T also issued under 26 U.S.C. 860G(c)(3) and (e). Section 1.860G-1 also issued under 26 U.S.C. 860G(a)(1)(B) and (e). Section 1.860G-3 also issued under 26 U.S.C. 860G(b) and 26 U.S.C. 860G(e). Section 1.861-2 also issued under 26 U.S.C. 863(a). Section 1.861-3 also issued under 26 U.S.C. 863(a). Section 1.861-8 also issued under 26 U.S.C. 882(c). Sections 1.861-9 and 1.861-9T also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e), 26 U.S.C. 865(i), and 26 U.S.C 7701(f). Section 1.861-10(e) also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e), 26 U.S.C. 865(i) and 26 U.S.C. 7701(f). Section 1.861-11 also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e), 26 U.S.C. 865(i), and 26 U.S.C. 7701(f). Section 1.861-14 also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e), 26 U.S.C. 865(i), and 26 U.S.C. 7701(f). Sections 1.861-8T through 1.861-14T also issued under 26 U.S.C. 863(a), 26 U.S.C. 864(e), 26 U.S.C. 865(i) and 26 U.S.C. 7701(f). Section 1.863-1 also issued under 26 U.S.C. 863(a). Section 1.863-2 also issued under 26 U.S.C. 863. Section 1.863-3 also issued under 26 U.S.C. 863(a) and (b), and 26 U.S.C. 936(h). Section 1.863-4 also issued under 26 U.S.C. 863. Section 1.863-6 also issued under 26 U.S.C. 863. Section 1.863-7 is issued under 26 U.S.C. 863(a). Section 1.864-5 also issued under 26 U.S.C. 7701(l). Section 1.864-8T also issued under 26 U.S.C. 864(d)(8). Section 1.865-1 also issued under 26 U.S.C. 863(a) and 865(j)(1). Section 1.865-2 also issued under 26 U.S.C. 863(a) and 865(j)(1). Section 1.871-1 also issued under 26 U.S.C. 7701(l). Section 1.871-7 also issued under 26 U.S.C. 7701(l). Section 1.871-9 also issued under 26 U.S.C. 7701(b)(11). Section 1.874-1 also issued under 26 U.S.C. 874. Section 1.881-2 also issued under 26 U.S.C. 7701(l). Section 1.881-3 also issued under 26 U.S.C. 7701(l). Section 1.881-4 also issued under 26 U.S.C. 7701(l). Section 1.882-4 also issued under 26 U.S.C. 882(c). Section 1.882-5 also issued under 26 U.S.C. 882, 26 U.S.C. 864(e), 26 U.S.C. 988(d), and 26 U.S.C. 7701(l). Section 1.883-1 is also issued under 26 U.S.C. 883. Section 1.883-2 is also issued under 26 U.S.C. 883. Section 1.883-3 is also issued under 26 U.S.C. 883. Section 1.883-4 is also issued under 26 U.S.C. 883. Section 1.883-5 is also issued under 26 U.S.C. 883. Section 1.884-0 also issued under 26 U.S.C. 884 (g). Section 1.884-1 also issued under 26 U.S.C. 884 (g). Section 1.884-1 (d) also issued under 26 U.S.C. 884 (c) (2) (A). Section 1.884-1 (d) (13) (i) also issued under 26 U.S.C. 884 (c) (2). Section 1.884-1 (e) also issued under 26 U.S.C. 884 (c) (2) (B). Section 1.884-2 also issued under 26 U.S.C. 884(g). Section 1.884-2T also issued under 26 U.S.C. 884 (g). Section 1.884-4 also issued under 26 U.S.C. 884 (g). Section 1.884-5 also issued under 26 U.S.C. 884 (g). Section 1.884-5 (e) and (f) also issued under 26 U.S.C. 884 (e) (4) (C). Section 1.892-1T also issued under 26 U.S.C. 892(c). Section 1.892-2T also issued under 26 U.S.C. 892(c). Section 1.892-3T also issued under 26 U.S.C. 892(c). Section 1.892-4T also issued under 26 U.S.C. 892(c). Section 1.892-5 also issued under 26 U.S.C. 892(c). Section 1.892-5T also issued under 26 U.S.C. 892(c). Section 1.892-6T also issued under 26 U.S.C. 892(c). Section 1.892-7T also issued under 26 U.S.C. 892(c). Section 1.894-1 also issued under 26 U.S.C. 894 and 7701(l). [[Page 10]] Sections 1.897-5T, 1.897-6T and 1.897-7T also issued under 26 U.S.C. 897 (d), (e), (g) and (j) and 26 U.S.C. 367(e)(2). Sections 1.902-1 and 902-2 also issued under 26 U.S.C. 902(c)(7). Section 1.904-4 also issued under 26 U.S.C. 904(d)(6). Section 1.904-5 also issued under 26 U.S.C. 904(d)(6). Section 1.904-6 also issued under 26 U.S.C. 904(d)(6). Section 1.904-7 also issued under 26 U.S.C. 904(d)(6). Section 1.904(b)-1 also issued under 26 U.S.C. 1(h)(11)(C)(iv) and 904(b)(2)(C). Section 1.904(b)-2 also issued under 26 U.S.C. 1(h)(11)(C)(iv) and 904(b)(2)(C). Section 1.904(f)-(2) also issued under 26 U.S.C. 904 (f)(3)(b). Section 1.904(i)-1 also issued under 26 U.S.C. 904(i). Sections 1.905-3T and 1.905-4T also issued under 26 U.S.C. 989(c)(4). Section 1.907(b)-1 is also issued under 26 U.S.C. 907(b). Section 1.907(b)-1T also issued under 26 U.S.C. 907(b). Source: T.D. 6500, 25 FR 11910, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, unless otherwise noted. REGULATED INVESTMENT COMPANIES AND REAL ESTATE INVESTMENT TRUSTS (a) In general. The term ``regulated investment company'' is defined to mean any domestic corporation (other than a personal holding company as defined in section 542) which meets (1) the requirements of section 851(a) and paragraph (b) of this section, and (2) the limitations of section 851(b) and Sec. 1.851-2. As to the definition of the term ``corporation'', see section 7701(a)(3). (b) Requirement. To qualify as a regulated investment company, a corporation must be: (1) Registered at all times during the taxable year, under the Investment Company Act of 1940, as amended (15 U.S.C. 80a-1 to 80b-2), either as a management company or a unit investment trust, or (2) A common trust fund or similar fund excluded by section 3(c)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-3(c)) from the definition of ``investment company'' and not included in the definition of ``common trust fund'' by section 584(a).