# Prop. Treas. Reg. § 1.861-8: Computation of taxable income from sources within the United States and from other sources and activities.

Proposed regulation, not in force. REG-117273-25, 91 FR 57832, published 2026-09-11 <https://www.federalregister.gov/documents/2026/09/11/2026-18645/allocation-and-apportionment-of-deductions-to-foreign-source-section-951a-category-income-and>. Interprets 26 U.S.C. § 861.

Par. 4. Section 1.861-8 is amended by: 1. Revising the fourth sentence of paragraph (b)(1); 2. Revising the second sentence of paragraph (e)(8)(i); and 3. Adding paragraph (h)(5). The revisions read as follows:

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(b) * * *

(1) * * * Allocation is accomplished by determining, with respect to each deduction, the class of gross income to which the deduction is definitely related and then allocating the deduction to such class of gross income (without regard to the taxable year in which such gross income is received or accrued or is expected to be received or accrued). * * *

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(e) * * *

(8) * * *

(i) * * * For example, for purposes of applying this paragraph (e)(8)(i) with respect to section 904 as the operative section, the source and separate category components of a net operating loss are determined by reference to the amounts of separate limitation loss and U.S. source loss (determined without regard to adjustments required under section 904(b), other than section 904(b)(5)) that are not allocated to reduce U.S. source income or income in other separate categories under the rules of sections 904(f) and 904(g) for the taxable year in which the net operating loss arose. * * *

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(h) * * *

(5) Paragraph (e)(8)(i) of this section applies to taxable years beginning after December 31, 2025. For taxable years that both begin after December 31, 2017, and end on or after December 2, 2018, and also begin on or before December 31, 2025, see § 1.861-8(e)(8)(i) as contained in 26 CFR part 1 revised as of April 1, 2026.