I.R.C. § 961(a) Increase In Basis —
Under regulations prescribed by the Secretary, the basis of a United States shareholder's
stock in a controlled foreign corporation, and the basis of property of a United
States shareholder by reason of which he is considered under section 958(a)(2) as owning stock of a controlled foreign corporation, shall be increased by the amount
required to be included in his gross income under section 951(a) with respect to such stock or with respect to such property, as the case may be,
but only to the extent to which such amount was included in the gross income of such
United States shareholder. In the case of a United States shareholder who has made
an election under section 962 for the taxable year, the increase in basis provided by this subsection shall not
exceed an amount equal to the amount of tax paid under this chapter with respect
to the amounts required to be included in his gross income under section 951(a).
I.R.C. § 961(b) Reduction In Basis
I.R.C. § 961(b)(1) In General —
Under regulations prescribed by the Secretary, the adjusted basis of stock or other
property with respect to which a United States shareholder or a United States person
receives an amount which is excluded from gross income under section 959(a) shall be reduced by the amount so excluded. In the case of a United States shareholder
who has made an election under section 962 for any prior taxable year, the reduction in basis provided by this paragraph shall
not exceed an amount equal to the amount received which is excluded from gross income
under section 959(a) after the application of section 962(d).
I.R.C. § 961(b)(2) Amount In Excess Of Basis —
To the extent that an amount excluded from gross income under section 959(a)
exceeds the adjusted basis of the stock or other property with respect to which it
is received, the amount shall be treated as gain from the sale or exchange of property.
I.R.C. § 961(c) Basis Adjustments In Stock Held By Foreign Corporations —
Under regulations prescribed by the Secretary, if a United States shareholder is
treated under section 958(a)(2) as owning stock in a controlled foreign corporation which is owned by another controlled
foreign corporation, then adjustments similar to the adjustments
provided by subsections (a) and (b) shall be made to—
I.R.C. § 961(c)(1) —
the basis of such stock, and
I.R.C. § 961(c)(2) —
the basis of stock in any other controlled foreign corporation by reason of which
the United States shareholder is considered under section 958(a)(2) as owning the stock described in paragraph (1),
but only for the purposes of determining the amount included under section 951 in the gross income of such United States shareholder (or any other United States
shareholder who acquires from any person any portion of the interest of such United
States shareholder by reason of which such shareholder was treated as owning such
stock, but only to the extent of such portion, and subject to such proof of identity
of such interest as the Secretary may prescribe by regulations). The preceding sentence
shall not apply with respect to any stock to which a basis adjustment applies under
subsection (a) or (b).
I.R.C. § 961(d) Basis In Specified 10-Percent Owned Foreign Corporation Reduced By Nontaxed Portion
Of Dividend For Purposes Of Determining Loss —
If a domestic corporation received a dividend from a specified 10-percent owned foreign
corporation (as defined in section 245A) in any taxable year, solely for purposes
of determining loss on any disposition of stock of such foreign corporation in such
taxable year or any subsequent taxable year, the basis of such domestic corporation
in such stock shall be reduced (but not below zero) by the amount of any deduction
allowable to such domestic corporation under section 245A with respect to such stock
except to the extent such basis was reduced under section 1059 by reason of a dividend for which such a deduction was allowable.
(Added Pub. L. 87-834, 12(a), Oct. 16, 1962, 76 Stat. 1022, and amended Pub. L. 94-455, title XIX, 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 105-34, title XI, Sec. 1112(b)(1), Aug. 5, 1997, 111 Stat 788; Pub. L. 109-135, title IV, Sec. 409(b), Dec. 21, 2005, 119 Stat. 2577; Pub. L. 115-97, title I, Sec. 14102(b)(1), Dec. 22, 2017, 131 Stat. 2054.)
BACKGROUND NOTES
AMENDMENTS
2017 - Subsec. (d). Pub. L. 115-97, Sec. 14102(b)(1), added subsec. (d).
2005 - Subsec. (c). Pub. L. 109-135, Sec. 409(b), amended subsec. (c). Before amendment, it read as follows:
“(c) Basis Adjustments in Stock Held by Foreign Corporation.--
Under regulations prescribed by the Secretary, if a United States shareholder is treated
under section 958(a)(2)
as owning any stock in a controlled foreign corporation which is actually owned by
another controlled foreign corporation, adjustments similar to the adjustments provided
by subsections (a) and (b) shall be made to the basis of such stock in the hands of
such other controlled foreign corporation, but only for the purposes of determining
the amount included under section 951 in the gross income of such United States shareholder
(or any other United States shareholder who acquires from any person any portion of
the interest of such United States shareholder by reason of which such shareholder
was treated as owning such stock, but only to the extent of such portion, and subject
to such proof of identity of such interest as the Secretary may prescribe by regulations).”
1997--Subsec. (c). Pub. L. 105-34, Sec. 1112(b)(1). Added subsection (c).
1976--Subsecs. (a), (b)(1). Pub. L. 94-455 struck out “or his delegate"
after “Secretary”.
EFFECTIVE DATE OF 20175 AMENDMENT
Amendment by Sec. 14102(b)(1) of Pub. L. 115-97 effective for distributions made after December 31, 2017.
EFFECTIVE DATE OF 2005 AMENDMENT
Amendment by Sec. 409(b)
of Pub. L. 109-135 effective as if included in in the provisions of the Taxpayer Relief Act of 1997
[Pub. L. 105-34, Sec. 1112]
to which it relates.
EFFECTIVE DATE OF 1997 AMENDMENTS
Section 1112(2) of Pub. L. 105-34 provided that:
“The amendment made by paragraph (1) shall apply for purposes of determining inclusions
for taxable years of United States shareholders beginning after December 31, 1997[enacted:
Aug. 5, 1997]”.
DUAL RESIDENT COMPANIES
Basis adjustments of this section not applicable in certain circumstances involving
dual resident companies, see section 6126 of Pub. L. 100-647, set out as a note under section 1502 of this title.
