Page 752 - Large Business IRS Training Guides

Example 5:
No Credit Allowed Under Section

960(a)(3) (cont.)

All corporations have • USP is also deemed to include the
a 12/31/17 tax year. $150 of other DFI

of DFIC because
All corporations have
section 965(b) PTEP as a
a U.S. dollar functional USP has
E&P
currency result of EPDFC’s specified
deficit.
USP • As a result, USP is deemed to pay
the

$30 of
taxes associated with the $150
of DFI.
• Because the $150 of DFI
is not
DFIC EPDFC actually
included in USP’s taxable

income,
there is no deemed paid
credit.
• DFI: $200 • Specified E&P deficit: ($150)

• Cash: $120 • Post-1986 foreign income • As a result, USP is never allowed a
• Post-1986 undistributed taxes: $100 credit for the remaining $30 of post­
earnings: $200
(S.902(c)(1))
1986 foreign income taxes.
• Post-1986 foreign
income taxes: $40
(S.902(c)(2))

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