Page 743 - Large Business IRS Training Guides

Section 965(g): Foreign Tax

Credit Haircut

a credit under section 901 nor a deduction is allowed for the applicable
• Neither

percentage (“haircut”) of any foreign income taxes paid or accrued (or treated as
paid or accrued) with respect to income for which the deduction under section
is allowed.
965(c)

foreign taxes on distributions of section 965(a) PTEP and 965(b) PTEP to
• Direct
are subject to haircut.
U.S. shareholder

• Applies for both an election to credit (section 901) and deduct (section 164) those foreign taxes

accrued and subject to haircut include:
• Taxes treated as paid or
• Foreign income taxes deemed paid under section 960(a)(1) with respect to a
section 965(a) inclusion;

• Foreign income taxes deemed paid under section 960(a)(3) or section 960(b) with

respect to distributions of section 965(a) PTEP or section 965(b) PTEP;

• Foreign income taxes allocated under Treas. Reg. §1.901-2(f)(4); and

• A distributive share of foreign income taxes paid or accrued by a partnership.
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