Par. 13. Section 1.1502-32 is amended by: 1. Adding paragraphs (b)(3)(ii)(E), (b)(3)(ii)(F), and (b)(3)(iii)(C). 2. Revising paragraph (j). The revision and additions read as follows:
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(b) * * *
(3) * * *
(ii) * * *
(E) Adjustment for the offset tested income amount of a controlled foreign corporation in relation to section 951A. S's tax-exempt income for a taxable year includes the aggregate of S's offset tested income amounts (within the meaning of § 1.1502-51(c)(3)) with respect to a controlled foreign corporation (within the meaning of section 957) for all of its U.S. shareholder inclusion years (within the meaning of § 1.951A-1(e)(4)), to the extent such aggregate does not exceed the excess (if any) of—
( 1 ) The aggregate of S's used tested loss amounts (within the meaning of § 1.1502-51(c)(2)) with respect to the controlled foreign corporation for all of its U.S. shareholder inclusion years, over
( 2 ) The aggregate of S's offset tested income amounts with respect to the controlled foreign corporation for all of its U.S. shareholder inclusion years previously treated as tax-exempt income pursuant to this paragraph.
(F) Adjustment for the net offset tested income amount of a controlled foreign corporation in relation to section 951A. S will be treated as having tax-exempt income immediately prior to a transaction ( recognition event ) in which another member of the group recognizes income, gain, deduction, or loss with respect to a share of S's stock to the extent provided in this paragraph (b)(3)(ii)(F). S's tax-exempt income is equal to the portion of the allocable amount that would have been characterized as a dividend to which section 245A, but not section 1059, would have applied if the allocable amount had been distributed by a controlled foreign corporation to the owner of the transferred shares immediately before the recognition event. For purposes of this paragraph—
( 1 ) The term transferred shares means the shares of a controlled foreign corporation that S owns within the meaning of section 958(a) or is considered to own by applying the rules of ownership of section 958(b) and that are indirectly transferred as part of the recognition event; and
( 2 ) The term allocable amount means the net offset tested income amount (within the meaning of § 1.1502-51(e)(14)) allocable to the transferred shares.
(iii) * * *
(C) Adjustment for the used tested loss amount of a controlled foreign corporation in relation to section 951A. S's noncapital, nondeductible expense includes its amount of used tested loss amount (within the meaning of § 1.1502-51(c)(2)) with respect to a controlled foreign corporation (within the meaning of section 957) for a U.S. shareholder inclusion year (within the meaning of § 1.951A-1(e)(4)).
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(j) Applicability date —(1) In general. Paragraph (b)(4)(iv) of this section applies to any original consolidated Federal income tax return due (without extensions) after June 14, 2007. For original consolidated Federal income tax returns due (without extensions) after May 30, 2006, and on or before June 14, 2007, see § 1.1502-32T as contained in 26 CFR part 1 in effect on April 1, 2007. For original consolidated Federal income tax returns due (without extensions) on or before May 30, 2006, see § 1.1502-32 as contained in 26 CFR part 1 in effect on April 1, 2006.
(2) Adjustment for the offset tested income amount, net offset tested income amount, and used tested loss amount of a controlled foreign corporation. Paragraphs (b)(3)(ii)(E), (b)(3)(ii)(F), and (b)(3)(iii)(C) of this section apply to any consolidated Federal income tax return for a taxable year in which or with which the taxable year of a controlled foreign corporation beginning after December 31, 2017, ends.
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