26 USC 535 - Accumulated taxable income

U.S Code last checked for updates: Nov 22, 2024

§ 535.

Accumulated taxable income

(a)

Definition

(b)

Adjustments to taxable income

For purposes of subsection (a), taxable income shall be adjusted as follows:

(1)

Taxes

(2)

Charitable contributions

(3)

Special deductions disallowed

(4)

Net operating loss

(5)

Capital losses

(A)

In general

(B)

Recapture of previous deductions for capital gains

The aggregate amount allowable as a deduction under subparagraph (A) for any taxable year shall be reduced by the lesser of—

(i)

the nonrecaptured capital gains deductions, or

(ii)

the amount of the accumulated earnings and profits of the corporation as of the close of the preceding taxable year.

(C)

Nonrecaptured capital gains deductions

For purposes of subparagraph (B), the term “nonrecaptured capital gains deductions” means the excess of—

(i)

the aggregate amount allowable as a deduction under paragraph (6) for preceding taxable years beginning after July 18, 1984, over

(ii)

the aggregate of the reductions under subparagraph (B) for preceding taxable years.

(6)

Net capital gains

(A)

In general

There shall be allowed as a deduction—

(i)

the net capital gain for the taxable year (determined with the application of paragraph (7)), reduced by

(ii)

the taxes attributable to such net capital gain.

(B)

Attributable taxes

For purposes of subparagraph (A), the taxes attributable to the net capital gain shall be an amount equal to the difference between—

(i)

the taxes imposed by this subtitle (except the tax imposed by this part) for the taxable year, and

(ii)

such taxes computed for such year without including in taxable income the net capital gain for the taxable year (determined without the application of paragraph (7)).

(7)

Capital loss carryovers

(A)

Unlimited carryforward

(B)

Section 1212 inapplicable

(8)

Special rules for mere holding or investment companies

In the case of a mere holding or investment company—

(A)

Capital loss deduction, etc., not allowed

(B)

Deduction for certain offsets

(C)

Earnings and profits

(9)

Special rule for capital gains and losses of foreign corporations

(10)

Controlled foreign corporations

(c)

Accumulated earnings credit

(1)

General rule

(2)

Minimum credit

(A)

In general

(B)

Certain service corporations

(3)

Holding and investment companies

(4)

Accumulated earnings and profits

(5)

Cross reference

(d)

Income distributed to United States-owned foreign corporation retains United States connection

(1)

In general

For purposes of this part, if 10 percent or more of the earnings and profits of any foreign corporation for any taxable year—

(A)

is derived from sources within the United States, or

(B)

is effectively connected with the conduct of a trade or business within the United States,

any distribution out of such earnings and profits (and any interest payment) received (directly or through 1 or more other entities) by a United States-owned foreign corporation shall be treated as derived by such corporation from sources within the United States.

(2)

United States-owned foreign corporation

(Aug. 16, 1954, ch. 736, 68A Stat. 180; Pub. L. 85–866, title I, § 31, title II, § 205(a), Sept. 2, 1958, 72 Stat. 1631, 1680; Pub. L. 87–403, § 3(b), Feb. 2, 1962, 76 Stat. 6; Pub. L. 87–834, § 9(d)(2), Oct. 16, 1962, 76 Stat. 1001; Pub. L. 88–272, title II, § 207(b)(4), Feb. 26, 1964, 78 Stat. 42; Pub. L. 91–172, title IV, § 401(b)(2)(C), title V, § 512(f)(5), (6), Dec. 30, 1969, 83 Stat. 602, 641; Pub. L. 94–12, title III, § 304(a), Mar. 29, 1975, 89 Stat. 45; Pub. L. 94–455, title X, § 1033(b)(3), title XIX, §§ 1901(a)(74), (b)(20)(A), (32)(C), (33)(D), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1628, 1777, 1797, 1800, 1801, 1834; Pub. L. 97–34, title II, § 232(a), (b)(1), Aug. 13, 1981, 95 Stat. 250; Pub. L. 98–369, div. A, title I, §§ 58(b), 125(a), July 18, 1984, 98 Stat. 575, 647; Pub. L. 99–514, title XII, § 1225(a), title XVIII, § 1899A(17), Oct. 22, 1986, 100 Stat. 2558, 2959; Pub. L. 101–508, title XI, § 11801(c)(18), Nov. 5, 1990, 104 Stat. 1388–528; Pub. L. 108–357, title IV, § 402(b)(1), Oct. 22, 2004, 118 Stat. 1492; Pub. L. 109–135, title IV, § 403(n)(2), Dec. 21, 2005, 119 Stat. 2626; Pub. L. 113–295, div. A, title II, § 221(a)(64), Dec. 19, 2014, 128 Stat. 4048; Pub. L. 115–97, title I, §§ 13001(b)(5)(B), 14301(c)(4), Dec. 22, 2017, 131 Stat. 2098, 2222.)

cite as: 26 USC 535