Page 738 - Large Business IRS Training Guides

Ordering Rule

Treas.
Reg. §1.965-2(b) sets forth a rule that dictates the sequence in which
to different categories of an SFC’s E&P must be made (“ordering rule”):
adjustments

(b)(1) Subpart F and 1248: USSH’s inclusions under section 951(a)(1)(A) (other than by reason

of section 965) and section 1248 are determined and section 959(c)(2) E&P is adjusted.
(b)(2) Certain distributions: The treatment of SFC-to-SFC distributions
made before 1/1/18
and any
other distribution made in a pre-inclusion year before the relevant E&P measurement
date is determined under
section 959.

(b)(3) Section 965(a): E&P of a DFIC is adjusted for USSH’s section 965(a) inclusion amount,
and adjustments are made for EPDFCs.

(b)(4) Other distributions (including to the U.S. parent): (B)(2) distributions, if disregarded

are then redetermined, and all other distributions are determined under section 959.

(b)(5) Section 956: Section 959(c)(2)
E&P are reclassified as 959(c)(1) E&P, as applicable.

Remember
• 959(c)(1): Includes E&P attributable to section 956 inclusions

• 959(c)(2): Includes
E&P attributable to subpart F income
• 959(c)(3): All other
E&P (generally untaxed)

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