Page 639 - Large Business IRS Training Guides

Specified Interest Expense 2

• Specified interest
expense includes the interest

expense of
a CFC with a tested loss.

• However,
the final regulations reduce the tested interest

expense of
a tested loss CFC (and ultimately, the
specified interest expense of a US
shareholder) by an

amount
equal to the notional return on the QBAI that the
tested loss CFC
would have had if the CFC were

Treas. Reg. §1.951A­
instead a tested income CFC.

4(b)(1)(i) and (iv) and (c)
Example 5.

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