PART 4—TEMPORARY INCOME TAX REGULATIONS UNDER SECTION 954 OF THE INTERNAL REVENUE CODE Authority: 26 U.S.C. 7805. Section 4.954-0 also issued under 26 U.S.C. 954 (b) and (c). Section 4.954-1 also issued under 26 U.S.C. 954 (b) and (c). Section 4.954-2 also issued under 26 U.S.C. 954 (b) and (c). § 4.954-0 Introduction. (a) Effective date. (2) The provisions of §§ 1.954A-1 and 1.954A-2 apply to taxable years of a controlled foreign corporation beginning before January 1, 1987. All references therein to sections of the Code are to the Internal Revenue Code of 1954 prior to the amendments made by the Tax Reform Act of 1986. (b) Outline of regulation provisions for sections 954(b)(3), 954(b)(4), 954(b)(5) and 954(c) for taxable years of a controlled foreign corporation beginning after December 31, 1986. (I) § 4.954-0 Introduction. (a) Effective dates. (b) Outline. (II) § 4.954-1 Foreign base company income. (a) In general. (1) Purpose and scope. (2) Definition of gross foreign base company income. (3) Definition of adjusted gross foreign base company income. (4) Definition of net foreign base company income. (5) Definition of adjusted net foreign base company income. (6) Insurance income definitions. (7) Additional items of adjusted net foreign base company income or adjusted net insurance income by reason of section 952(c). (8) Illustration. (b) Computation of adjusted gross foreign base company income and adjusted gross insurance income. (1) De minimus rule and full inclusion rule. (i) In general. (ii) Five percent de minimus test. (iii) Seventy percent full inclusion test. (2) Character of items of adjusted gross foreign base company income. (3) Coordination with section 952(c). (4) Anti-abuse rule. (i) In general. (ii) Presumption. (iii) Definition of related person. (iv) Illustration. (5) Illustration. (c) Computation of net foreign base company income. (d) Computation of adjusted net foreign base company income or adjusted net insurance income. (1) Application of high tax exception. (2) Effective rate at which taxes are imposed. (3) Taxes paid or accrued with respect to an item of income. (i) Income other than foreign personal holding company income. (ii) Foreign personal holding company income. (4) Definition of an item of income. (i) Income other than foreign personal holding company income. (ii) Foreign personal holding company income. (A) In general. (B) Consistency rule. (5) Procedure. (6) Illustrations. (e) Character of an item of income. (1) Substance of the transaction. (2) Separable character. (3) Predominant character. (4) Coordination of categories of gross foreign base company income or gross insurance income. (III) § 4.954-2 Foreign Personal Holding Company Income. (a) Computation of foreign personal holding company income. (1) In general. (2) Coordination of overlapping definitions. (3) Changes in use or purpose with which property is held. (i) In general. (ii) Illustrations. (4) Definitions. (i) Interest. (ii) Inventory and similar property. (iii) Regular dealer. (iv) Dealer property. (v) Debt instrument. (b) Dividends, etc. (1) In general. (2) Exclusion of certain export financing. (i) In general. (ii) Conduct of a banking business. (iii) Illustration. (3) Exclusion of dividends and interest from related persons. (i) Excluded dividends and interest. (ii) Interest paid out of adjusted foreign base company income or insurance income. (iii) Dividends paid out of prior years' earnings. (iv) Fifty percent substantial assets test. (v) Value of assets. (vi) Location of tangible property used in a trade or business. (A) In general. (B) Exception. (vii) Location of intangible property used in a trade or business. (A) In general. (B) Property located in part in the payor's country of incorporation and in part in other countries. (viii) Location of property held for sale to customers. (A) In general. (B) Inventory located in part in the payor's country of incorporation and in part in other countries. (ix) Location of debt instruments. (x) Treatment of certain stock interests. (xi) Determination of period during which property is used in a trade or business. (xii) Treatment of banks and insurance companies [Reserved] (4) Exclusion of rents and royalties derived from related persons. (i) In general. (ii) Rents or royalties paid out of adjusted foreign base company income or insurance income. (5) Exclusion of rents and royalties derived in the active conduct of a trade or business. (6) Treatment of tax exempt interest. (c) Excluded rents. (1) Trade or business cases. (2) Special rules. (i) Adding substantial value. (ii) Substantiality of foreign organization. (iii) Definition of active leasing expense. (iv) Adjusted leasing profits. (3) Illustrations. (d) Excluded royalties. (1) Trade or business cases. (2) Special rules. (i) Adding substantial value. (ii) Substantiality of foreign organization. (iii) Definition of active licensing expense. (iv) Definition of adjusted licensing profit. (3) Illustrations. (e) Certain property transactions. (1) In general. (i) Inclusion of FPHC income. (ii) Dual character property. (2) Property that gives rise to certain income. (i) In general. (ii) Exception. (3) Property that does not give rise to income. (4) Classification of gain or loss from the disposition of a debt instrument or on a deferred payment sale. (i) Gain. (ii) Loss. (5) Classification of options and other rights to acquire or transfer property. (6) Classification of certain interests in pass-through entities. [Reserved] (f) Commodities transactions. (1) In general. (2) Definitions. (i) Commodity. (ii) Commodities transaction. (3) Definition of the term “qualified active sales”. (i) In general. (ii) Sale of commodities. (iii) Active conduct of a commodities business. (iv) Definition of the term “substantially all.” (4) Definition of the term “qualified hedging transaction”. (g) Foreign currency gain. (1) In general. (2) Exceptions. (i) Qualified business units using the dollar approximate separate transactions method. (ii) Tracing to exclude foreign currency gain or loss from qualified business and hedging transactions. (iii) Election out of tracing. (3) Definition of the term “qualified business transaction”. (i) In general. (ii) Specific section 988 transactions attributable to the sale of goods or services. (A) Acquisition of debt instruments. (B) Becoming the obligor under debt instruments. (C) Accrual of any item of gross income. (D) Accrual of any item of expense. (E) Entering into forward contracts, futures contracts, options, and similar instruments. (F) Disposition of nonfunctional currency. (4) Definition of the term “qualified hedging transaction”. (i) In general. (ii) Change in purpose of hedging transaction. (5) Election out of tracing. (i) In general. (ii) Exception. (iii) Procedure. (A) In general. (B) Time and manner. (C) Termination. (h) Income equivalent to interest. (1) In general. (2) Illustrations. (3) Income equivalent to interest from factoring. (i) General rule. (ii) Exceptions. (iii) Factored receivable. (iv) Illustrations. (4) Determination of sales income. (5) Receivables arising from performance of services. [T.D. 8216, 53 FR 27491, July 21, 1988. Redesignated and amended by T.D. 8618, 60 FR 46530, Sept. 7, 1995] § 4.954-1 Foreign base company income; taxable years beginning after December 31, 1986. (a) In general Purpose and scope. (2) Gross foreign base company income. (i) Its foreign personal holding company income, as defined in section 954(c) and § 1.954-2T, (ii) Its foreign base company sales income, as defined in section 954(d) and the regulations thereunder, (iii) Its foreign base company services income, as defined in section 954(e) and the regulations thereunder, (iv) Its foreign base company shipping income, as defined in section 954(f) and the regulations thereunder, and (v) Its foreign base company oil related income, as defined in section 954(g) and the regulations thereunder. (3) Adjusted gross foreign base company income. (4) Net foreign base company income. (5) Adjusted net foreign base company income. (6) Insurance income definitions. (7) Additional items of adjusted net foreign base company income or adjusted net insurance income by reason of section 952(c). (8) Illustration. Example. (i) Gross income. CFC, (ii) Expenses. CFC (iii) Earnings and deficits. CFC CFC CFC (iv) Taxes. (v) Conclusion. CFC Step 1—Determine gross income: (1) Gross income $1000 Step 2—Determine gross foreign base company income and gross insurance income: (2) Interest income included in foreign personal holding company income under section 954 (c) 100 (3) Foreign base company sales income under section 954(d) 50 (4) Total gross foreign base company income gross insurance income as defined in sections 954(c), (d), (e), (f) and (g) and 953 and the regulations thereunder (line (3) plus line (4)) 150 Step 3—Determine adjusted gross foreign base company income and adjusted gross insurance income: (5) Five percent of gross income (.05 × line (1)) 50 (6) Seventy percent of gross income (.70 × line (1)) 700 (7) Adjusted gross foreign base company income and adjusted gross insurance income after the application of the de minimis test of paragraph (b) (line (4), or zero if line (4) is less than the lesser of line (5) or $1,000,000) 150 (8) Adjusted gross foreign base company income and adjusted gross insurance income after the application of the full inclusion test of paragraph (b) (line (4), or line (1) if line (4) is greater than line (6)) 150 Step 4—Compute net foreign base company income: (9) Related person interest expense and other expense allocable and apportionable to foreign personal holding company income 10 (10) Deductions allocable and apportionable to foreign base company sales income 20 (11) Foreign personal holding company income after allocating deductions under section 954(b)(5) and paragraph (c) of this section (the lesser of line (2) or line (7), reduced (but not below zero) by line (9)) 90 (12) Foreign base company sales income after allocating deductions under section 954(b)(5) and paragraph (c) of this section (the lesser of line (3) or line (7), reduced (but not below zero) by line (10)) 30 (13) Total net foreign base company income after allocating deductions under section 954(b)(5) and paragraph (c) (line (11) plus line (12)) 120 Step 5—Compute net insurance income: (14) Net insurance income under section 953 and the regulations thereunder 0 Step 6—Compute adjusted net foreign base company income: (15) Foreign tax imposed on foreign personal holding company income (as determined under paragraph (d)) 30 (16) Foreign tax imposed on foreign base company sales income (as determined under paragraph (d)) 14 (17) Ninety percent of the maximum U.S. corporate tax rate 30.6 (18) Effective rate of foreign tax imposed on foreign personal holding company income (interest) under section 954(b)(4) and paragraph (d) (line (15) divided by line (11)) 33 (19) Effective rate of foreign tax imposed on $40 of foreign base company sales income under section 954(b)(4) and paragraph (d) (line (16) divided by line (12)) 47 (20) Foreign personal holding company income subject to a high foreign tax under section 954(b)(4) and paragraph (d) (zero, or line (11) if line (18) is greater than line (17)) 90 (21) Foreign base company sales income subject to a high foreign tax under section 954(b)(4) and paragraph (d) (zero, or line (12) if line (19) is greater than line (17)) 30 (22) Adjusted net foreign base company income after applying section 954(b)(4) and paragraph (d) (line (13), reduced by the sum of line (20) and line (21)) 0 Step 7—Compute adjusted net insurance income: (23) Adjusted net insurance income 0 Step 8—Additions to or reduction of adjusted net foreign base company income by reason of section 952(c): (24) Earnings and profits for the current year 500 (25) The excess in earnings and profits over subpart F income subject to being recharacterized as adjusted net foreign base company income under section 952(c)(2) (excess of line (24) over the sum of lines (22) and (23); if there is a deficit, then the limitation of section 952(c)(1) may apply for the current year) 500 (26) Amount of reduction in subpart F income for prior taxable years by reason of the limitation of section 952(c)(1) and the regulations thereunder 600 (27) Subpart F income as defined in section 952(a), assuming section 952(a) (3), (4), or (5) does not apply (the sum of line (22), line (23), and the lesser of line (25) or line (26)) 500 (b) Computation of adjusted gross foreign base company income and adjusted gross insurance income De minimis rule, etc. In general. (ii) Five percent de minimis test In general. ( 1 ( 2 Controlled foreign corporations having a functional currency other than the U.S. dollar shall translate the $1,000,000 threshold using the exchange rate provided under section 989(b)(3) and the regulations thereunder for amounts included in income under section 951(a). (B) Coordination with section 864(d). (iii) Seventy percent full inclusion test. (2) Character of items of gross income included in adjusted gross foreign base company income. (3) Coordination with section 952(c). (4) Anti-abuse rule In general. (ii) Presumption. (A) The activities now carried on by the controlled foreign corporations, or the assets used in those activities, are substantially the same activities that were carried on, or assets that were previously held by a single controlled foreign corporation, and the United States shareholders of the controlled foreign corporations or related persons (as determined under subdivision (iii) of this paragraph (b)(4)) are substantially the same as the United States shareholders of the one controlled foreign corporation in that prior taxable year. A presumption made in connection with the requirements of this subdivision (A) of paragraph (b)(4)(ii) may be rebutted by proof that the activities carried on by each controlled foreign corporation would constitute a separate branch under the principles of § 1.367(a)-6T(g) if carried on directly by a United States person. (B) The controlled foreign corporations carry on a business, financial operation, or venture as partners directly or indirectly in a partnership (as defined in section 7701(a)(2) and § 301.7701-3) that is a related person (as defined in subdivision (iii) of this paragraph (b)(4)) with respect to each such controlled foreign corporation. (C) The activities carried on by the controlled foreign corporations would constitute a single branch operation under § 1.367(a)-6T(g)(2) if carried on directly by the United States person. (iii) Related persons. (iv) Illustration. Example. USP is the sole United States shareholder of three controlled foreign corporations: CFC1, CFC2 CFC3. FP, FP, FP FP. FP, CFC1 CFC2 CFC3 Gross income $4,000,000 $8,000,000 $12,000,000 Five percent of gross income 200,000 400,000 600,000 Foreign base company income 199,000 398,000 597,000 Thus, without the application of the anti-abuse rule of this subparagraph (5), each controlled foreign corporation would be treated as having no foreign base company income after the application of the de minimis rule of section 954(b)(3)(A) and § 1.954-1T(b)(1). However, under these facts the requirements of subdivision (i) of this paragraph (b)(4) are presumed to be met. The sum of the foreign base company income of the controlled foreign corporations is $1,194,000. Thus, the amount of adjusted gross foreign base company income will not be less than the amount of gross foreign base company income by reason of the de minimis rule of section 954(b)(3)(A) and this paragraph (b). (5) Illustration. Example. (i) Gross Income. CFC, (ii) Expenses. CFC (iii) Earnings and deficits. CFC CFC CFC (iv) Taxes. (v) Conclusion. CFC Step 1—Determine gross income: (1) Gross income $1000 Step 2—Compute gross foreign base company income and gross insurance income: (2) Gross foreign base company income and insurance income as defined in sections 954(c), (d), (e), (f), (g) and 953 and the regulations thereunder (interest income) 720 Step 3—Compute adjusted gross foreign base company income: (3) Seventy percent of gross income (.70 × line (1)) 700 (4) Adjusted gross foreign base company income or insurance income after the application of the full inclusion rule of this paragraph (b)(1) (line (2), or line (1) if line (2) is greater than line (3)) 1000 (5) Full inclusion foreign base company income under paragraph (a)(2)(vi) (line (4) minus line (2)) 280 Step 4—Compute net foreign base company income: (6) Related person interest expense and other deductions allocable and apportionable to foreign personal holding company income under section 954(b)(5) and paragraph (c) 400 (7) Deductions allocable and apportionable to full inclusion foreign base company income under section 954(b)(5) and paragraph (c) 250 (8) Foreign personal holding company income after allocating deductions under section 954(b)(5) and paragraph (c) of this section (line (2) reduced (but not below zero) by line (6)) 320 (9) Full inclusion foreign base company income after allocating deductions under section 954(b)(5) paragraph (c) of this section (line (5) reduced (but not below zero) by line (7)) 30 (10) Total gross foreign base company income after allocating deductions under section 954(b)(5) and paragraph (c) (line (8) plus line (9)) 350 Step 5—Compute net insurance income: (11) Net insurance income under section 953 and the regulations thereunder 0 Step 6—Compute adjusted net foreign base company income: (12) Foreign tax imposed on foreign personal holding company income (interest) 120 (13) Foreign tax imposed on full inclusion foreign base company income 2 (14) Ninety percent of the maximum U.S. corporate tax rate 30.6 (15) Effective rate of foreign tax imposed on $320 of foreign personal holding company income under section 954(b)(4) and paragraph (d) (line (12) divided by line (8)) 38 (16) Effective rate of foreign tax imposed of $30 of full inclusion foreign base company income under section 954(b)(4) and paragraph (d) (line (13) divided by line (9)) 7 (17) Foreign personal holding company income subject to a high foreign tax under section 954(b)(4) and paragraph (d) (zero, or line (8) if line (15) is greater than line (14)) 320 (18) Full inclusion foreign base company income subject to a high foreign tax under section 954(b)(4) and paragraph (d) (zero, or line (9) if line (16) is greater than line (14)) 0 (19) Adjusted net foreign base company income after applying section 954(b)(4) and paragraph (d) (line (10), reduced by the sum of line (17) and line (18)) 30 Step 7—Compute adjusted net insurance income: (20) Adjusted net insurance income 0 Step 8—Additions to or reduction of adjusted net foreign base company income by reason of section 952(c): (21) Earnings and profits for the current year 350 (22) The excess in earnings and profits over subpart F income, which is subject to being recharacterized as adjusted net foreign base company income under section 952(c)(2) (excess of line (21) over the sum of line (19) and line (20)); if there is a deficit, then the limitation of 952(c)(1) may apply for the current year 320 (23) Amount of reduction in subpart F income for prior taxable years by reason of the limitation of section 952(c)(1) and the regulations thereunder 600 (24) Subpart F income as defined in section 952(a), assuming section 952(a) (3), (4), or (5) does not apply (the sum of line (19) and line (20) plus the lesser of line (22) or line (23)) 350 (25) Amount of prior years' deficit remaining to be recharacterized as subpart F income in later years under section 952(c) (excess of line (23) over line (22)) 280 (c) Computation of net foreign base company income. (1) Foreign personal holding company income, (2) Foreign base company sales income, (3) Foreign base company services income, (4) Foreign base company shipping income, (5) Foreign base company oil related income, or (6) Full inclusion foreign base company income. (d) Computation of adjusted net foreign base company income or adjusted net insurance income Application of high tax exception. (i) It is established that the income was subject to creditable income taxes imposed by a foreign country or countries at an effective rate that is greater than 90 percent of the maximum rate of tax specified in section 11 or 15 for the taxable year of the controlled foreign corporation; and (ii) An election is made under section 954(b)(4) and paragraph (d)(5) of this section to exclude the income from the computation of subpart F income. See paragraph (d)(4) of this section for the definition of the term “item of income.” For rules concerning the treatment for foreign tax credit purposes of amounts excluded from subpart F under section 954(b)(4), see § 904-1.4(c)(1). (2) Effective rate at which taxes are imposed. (i) The amount of income taxes paid or accrued (or deemed paid or accrued) with respect to the item of income, determined under paragraph (d)(3) of this section, divided by (ii) The item of net foreign base company income or net insurance income, determined under paragraph (d)(4) of this section (including the appropriate amount of income taxes referred to in subdivision (i) of this paragraph (d)(2), immediately above). (3) Taxes paid or accrued with respect to an item of income Income other than passive foreign personal holding company income. (ii) Passive foreign personal holding company income. (4) Item of income Income other than passive foreign personal holding company income. (A) Falls within a single category of net foreign base company income, as defined in paragraph (c) of this section, or net insurance income, and (B) Also falls within a single separate limitation category for purposes of sections 904(d) and 960 and the regulations thereunder. (ii) Passive foreign personal holding company income In general. (B) Consistency rule. (5) Procedure. (i) By controlling United States shareholders, as defined in § 1.964-1(c)(5), by attaching a statement to such effect with their original or amended income tax returns, and including any additional information required by subsequent administrative pronouncements, or (ii) In such other manner as may be prescribed in subsequent administrative pronouncements. An election made under the procedure provided by this paragraph (d)(5) is binding on all United States shareholders of the controlled foreign corporation. (6) Illustrations. Example 1. (i) Items of income. (ii) Effective rates of tax. Example 2. The facts are the same as in Example 1, except that CFC's country of operation imposes a tax of $50 with respect to CFC's dividend income. The interest income is still high withholding tax interest. The dividend income is still passive income (without regard to the possible applicability of the high tax exception of section 904(d)(2)). Accordingly, CFC has two items of income for purposes of this paragraph (d): (1) $100 of FPHC/high withholding tax interest income, and (2) $50 of FPHC/passive income (net of the $50 foreign tax). Both items are taxed at an effective rate greater than 31.6 percent. Item 1: Foreign tax ($50) divided by sum ($150) of income item ($100) plus creditable tax thereon ($50) equals 33 percent. Item 2: Foreign tax ($50) divided by sum ($100) of income item ($50) plus creditable tax thereon ($50) equals 50 percent. Accordingly, an election may be made under paragraph (d)(5) of this section to exclude either, both, or neither of items 1 and 2 from subpart F. Example 3. The facts are the same as in Example 1, except that the $100 of portfolio dividend income is subject to a third-country withholding tax of $50, and the $150 of interest income is from sources within CFC's country of operation, is subject to a $10 income tax therein, and is not subject to a withholding tax. Although the interest income and the dividend income are both passive income, under paragraph (d)(4)(ii)(A) of this section they constitute separate items of income pursuant to the application of the grouping rules of § 1.904-4(c). Accordingly, CFC has two items of income for purposes of this paragraph (d): (1) $50 (net of tax) of FPHC/non-country of operation/greater than 15 percent withholding tax income; and (2) $140 (net of $10 tax) of FPHC/country of operation income. Item 1 is taxed at an effective rate greater than 30.6 percent, but Item 2 is not. Item 1: Foreign tax ($50) divided by sum ($100) of income item ($50) plus creditable tax thereon ($50) equals 50 percent. Item 2: Foreign tax ($10) divided by sum ($150) of income item ($140) plus creditable tax thereon ($10) equals 6.67 percent. Therefore, an election may be made under paragraph (d)(5) of this section to exclude Item 1 but not Item 2 from subpart F. Example 4. The facts are the same as in Example 3, except that the $150 of interest income is subject to an income tax of $50 in CFC's country of operation. Accordingly, CFC has two items of income, as in Example 4, but both items are taxed at an effective rate greater than 30.6 percent. Item 1: Foreign tax ($50) divided by sum ($100) of income item ($50) plus creditable tax thereon ($50) equals 50 percent. Item 2: Foreign tax ($50) divided by sum ($150) if income item ($100) plus creditable tax thereon ($50) equals 33 percent. Pursuant to the consistency rule of paragraph (d)(4)(ii)(B) of this section, CFC's shareholders must consistently elect or not elect to exclude from subpart F all items of FPHC income that are eligible to be excluded. Therefore, an election may be made to exclude both Item 1 and Item 2 from subpart F, or neither may be excluded. (e) Character of an item of income Substance of the transaction. (2) Separable character. (3) Predominant character. (4) Coordination of categories of gross foreign base company income or gross insurance income. (i) If an item of income is included in subpart F income under section 952(a)(1) and the regulations thereunder as insurance income, it is by definition excluded from any other category of subpart F income. (ii) If an item of income is included in the foreign base company oil related income of a controlled foreign corporation, it is by definition excluded from any other category of foreign base company income, other than as provided in subdivision (i) of this paragraph (e)(4). (iii) If an item of income is included in the foreign base company shipping income of a controlled foreign corporation, it is by definition excluded from any other category of foreign base company income, other than as provided in subdivisions (i) and (ii) of this paragraph (e)(4). (iv) If an item of income is included in foreign personal holding company income of a controlled foreign corporation, it is by definition not included in any other category of foreign base company income, other than as provided in subdivisions (i), (ii), and (iii) of this paragraph (e)(4). An item of income shall not be excluded from the definition of a category of gross foreign base company income or gross insurance income under this paragraph (e)(4) by reason of being included in the general definition of another category of gross foreign base company income or gross insurance income, if the item of income is excluded from that other category by a more specific provision of section 953 or 954 and the regulations thereunder. For example, income derived from a commodity transaction that is excluded from foreign personal holding company income under § 1.954-2T(f) as income from qualified active sales may be included in gross foreign base company income if it also meets the definition of foreign base company sales income. See § 1.954-2T(a)(2) for the coordination of overlapping categories within the definition of foreign personal holding company income. [T.D. 8216, 53 FR 27492, July 21, 1988. Redesignated and amended by T.D. 8618, 60 FR 46530, Sept. 7, 1995] § 4.954-2 Foreign personal holding company income; taxable years beginning after December 31, 1986. (a) Computation of foreign personal holding company income In general. (i) Dividends, interest, rents, royalties, and annuities as defined in paragraph (b) of this section; (ii) Gain from certain property transactions as defined in paragraph (e) of this section; (iii) Gain from commodities transactions as defined in paragraph (f) of this section; (iv) Foreign currency gain as defined in paragraph (g) of this section; and (v) Income equivalent to interest as defined in paragraph (h) of this section. Paragraph (a)(3) of this section provides rules for determining the use or purpose for which property is held, if a change in use or purpose would affect the computation of foreign personal holding company income under paragraphs (e), (f), and (g) of this section. Paragraphs (c) and (d) of this section provide rules for determining certain rents and royalties that are excluded from foreign personal holding company income under paragraph (b) of this section. (2) Coordination of overlapping definitions. (i) If a portion of the income from a transaction falls within the definition of income equivalent to interest under paragraph (h) of this section and the definition of gain from certain property transactions under paragraph (e) of this section, gain from a commodities transaction under paragraph (f) of this section (whether or not derived from a qualified hedging transaction or qualified active sales), or foreign currency gain under paragraph (g) of this section (whether or not derived from a qualified business transaction or a qualified hedging transaction), that portion of income is treated as income equivalent to interest for purposes of section 954(c) and this section. (ii) If a portion of the income from a transaction falls within the definition of foreign currency gain under paragraph (g) of this section (whether or not derived from a qualified business transaction or a qualified hedging transaction) and the definition of gain from certain property transactions under paragraph (e) of this section, or gain from a commodities transaction under paragraph (f) of this section (whether or not derived from a qualified hedging transaction or qualified active sales), that portion of income is treated as foreign currency gain for purposes of section 954(c) and this section. (iii) If a portion of the income from a transaction falls within the definition of gain from a commodities transaction under paragraph (f) of this section (whether or not derived from a qualified hedging transaction or qualified active sales) and the definition of gain from certain property transactions under paragraph (e) of this section, that portion of income is treated as gain from a commodities transaction for purposes of section 954(c) and this section. (3) Changes in the use or purpose with which property is held In general. (ii) Illustrations. Example 1. At the beginning of taxable year 1, CFC, CFC CFC CFC Example 2. For taxable years 1, 2, and 3, CFC, CFC CFC CFC CFC CFC Example 3. CFC, a controlled foreign corporation, is a regular dealer in unimproved land. The functional currency (as defined in section 985 and the regulations thereunder) of CFC CFC CFC CFC CFC Example 4. CFC, a controlled foreign corporation, is a regular dealer in widgets. The functional currency (as defined in section 985 and the regulations thereunder) of CFC CFC CFC CFC CFC CFC Example 5. CFC, a controlled foreign corporation, has country X currency as its functional currency under section 985 and the regulations thereunder. On day 1 of the current taxable year, CFC, CFC CFC CFC CFC CFC CFC CFC (4) Definitions. (i) Interest. (ii) Inventory and similar property. (iii) Regular dealer. (A) Regularly and actively engages as a merchant in purchasing property and selling it to customers in the ordinary course of business with a view to the gains and profits that may be derived therefrom, or (B) Makes a market in derivative financial products of property (such as forward contracts to buy or sell property, option contracts to buy or sell property, interest rate and currency swap contracts or other national principal contracts) by regularly and actively offering to enter into positions in such products to the public in the ordinary course of business. Purchasing and selling property through a regulated exchange or established off-exchange market (for example, engaging in futures transactions) is not actively engaging as a merchant for purposes of this section. (iv) Dealer property. (A) The controlled foreign corporation is a regular dealer in property of such kind, and (B) The property is held by the controlled foreign corporation in its capacity as a dealer. Property which is held by the controlled foreign corporation for investment or speculation is not such property. (v) Debt instrument. (b) Dividends, etc. In general. (i) Dividends, except certain dividends from related persons as described in paragraph (b)(3) of this section and distributions of previously taxed income under section 959(b) and the regulations thereunder; (ii) Interest, except export financing interest as defined in paragraph (b)(2) of this section and certain interest received from related persons as described in paragraph (b)(3) of this section; (iii) Rents and royalties, except certain rents and royalties received from related persons as described in (b)(4) of this section and rents and royalties derived in the active conduct of a trade or business as defined in paragraph (b)(5); and (iv) Annuities. (2) Exclusion of certain export financing In general. (ii) Conduct of a banking business. (iii) Illustration. Example. DS, a domestic corporation, manufactures property in the United States. In addition to selling inventory (property described in section 1221(1)), DS DS CFC, DS, DS, If, in issuing and servicing loans made with respect to purchases from DS DS, CFC DS DS (3) Exclusion of dividends and interest from related persons Excluded dividends and interest. (A) The payor is a corporation that is a related person as defined in section 954(a)(3), (B) The payor is created or organized (“incorporated”) under the laws of the same foreign country as the controlled foreign corporation, and (C) A substantial part of the payor's assets are used in a trade or business in the payor's country of incorporation as determined under subdivision (iv) of this paragraph (b)(3). Except as otherwise provided under this paragraph (b)(3), the principles of section 367(a) and regulations thereunder shall apply in determining whether the payor has a trade or business in its country of incorporation, and whether its assets are used in that trade or business. (ii) Interest paid out of adjusted foreign base company income or insurance income. (iii) Dividends paid out of prior years' earnings. (iv) Fifty percent substantial assets test. (v) Value of assets. (vi) Location of tangible property used in a trade or business In general. (B) Exception. (vii) Location of intangible property used in a trade or business In general. (B) Property located in part in the payor's country of incorporation and in part in other countries. (viii) Location of property held for sale to customers In general. (B) Inventory located in part in the payor's country of incorporation and in part in other countries. ( 1 ( 2 (ix) Location of debt instruments. (x) Treatment of certain stock interests. (xi) Determination of period during which property is used in a trade or business. (xii) Treatment of banks and insurance companies. (4) Exclusion of rents and royalties derived from related persons In general. (A) The payor is a corporation that is a related person as defined in section 954(d)(3), and (B) The rents or royalties are for the use of, or the privilege of using, property within the country under the laws of which the recipient of the payments is created or organized. If the property is used both within and without the country under the laws of which the controlled foreign corporation is created or organized, the part of the rent or royalty attributable to the use of, or the privilege of using, the property outside such country of incorporation is, unless otherwise provided, foreign personal holding company income under this paragraph (b). (ii) Rents or royalties paid out of adjusted foreign base company income or insurance income. (5) Exclusion of rents and royalties derived in the active conduct of a trade or business. (6) Treatment of tax exempt interest. (c) Excluded rents Trade or business cases. (i) Property which the lessor has manufactured or produced, or has acquired and added substantial value to, but only if the lessor is regularly engaged in the manufacture or production of, or in the acquisition and addition of substantial value to, property of such kind, (ii) Real property with respect to which the lessor, through its own officers or staff of employees, regularly performs active and substantial management and operational functions while the property is leased, (iii) Personal property ordinarily used by the lessor in the active conduct of a trade or business, leased during a temporary period when the property would, but for such leasing, be idle, or (iv) Property which is leased as a result of the performance of marketing functions by such lessor if the lessor, through its own officers or staff of employees located in a foreign country, maintains and operates an organization in such country which is regularly engaged in the business of marketing, or of marketing and servicing, the leased property and which is substantial in relation to the amount of rents derived from the leasing of such property. (2) Special rules Adding substantial value. (ii) Substantiality of foreign organization. (iii) Active leasing expenses (A) Deductions for compensation for personal services rendered by shareholders of, or related persons with respect to, the lessor, (B) Deductions for rents paid or accrued, (C) Deductions which, although generally allowable under section 162, would be specifically allowable to the lessor (were the lessor a domestic corporation) under sections other than section 162 (such as sections 167 and 168), and (D) Deductions for payments made to independent contractors with respect to the leased property. (iv) Adjusted leasing profit. (A) The rents paid or incurred by the controlled foreign corporation with respect to such gross rental income, (B) The amounts which would be allowable to such lessor (were the lessor a domestic corporation) as deductions under section 167 or 168 with respect to such rental income, and (C) The amounts paid to independent contractors with respect to such rental income. (3) Illustrations. Example 1. Controlled foreign corporation A A Example 2. Controlled foreign corporation D D D D D D Example 3. [Reserved] Example 4. Controlled foreign corporation E E E Example 5. Controlled foreign corporation F F F Example 6. Controlled foreign corporation G G G (d) Excluded royalties Trade or business cases. (i) Property which the licensor has developed, created, or produced, or has acquired and added substantial value to, but only so long as the licensor is regularly engaged in the development, creation, or production of, or in the acquisition of and addition of substantial value to, property of such kind, or (ii) Property which is licensed as a result of the performance of marketing functions by such licensor and the licensor, through its own staff of employees located in a foreign country, maintains and operates an organization in such country which is regularly engaged in the business of marketing, or of marketing and servicing, the licensed property and which is substantial in relation to the amount of royalties derived from the licensing of such property. (2) Special rules Adding substantial value. (ii) Substantiality of foreign organization. (iii) Active licensing expenses. (A) Deductions for compensation for personal services rendered by shareholders of, or related persons with respect to, the licensor, (B) Deductions for royalties paid or incurred, (C) Deductions which, although generally allowable under section 162, would be specifically allowable to the licensor (were the controlled foreign corporation a domestic corporation) under sections other than section 162 (such as section 167), and (D) Deductions for payments made to independent contractors with respect to the licensed property. (iv) Adjusted licensing profit. (A) The royalties paid or incurred by the controlled foreign corporation with respect to such gross royalty income, (B) The amounts which would be allowable to such licensor as deductions under section 167 (were the licensor a domestic corporation) with respect to such royalty income, and (C) The amounts paid to independent contractors with respect to such royalty income. (3) Illustrations. Example 1. Controlled foreign corporation A, A Example 2. Assume that Corporation A A A, A A A Example 3. Controlled foreign corporation B B, B, B Example 4. Controlled foreign corporation D D D D (e) Certain property transactions In general Inclusion in FPHC income. (A) Property which gives rise to dividends, interest, rents, royalties or annuities as described in paragraph (e)(2) of this section, and (B) Property which does not give rise to income, as described in paragraph (e)(3) of this section. If losses from the sale or exchange of such property exceed gains, the net loss is not within the definition of foreign personal holding company income under this paragraph (e), and may not be allocated to, or otherwise reduce, other foreign personal holding company income under section 954(b)(5) and § 1.954-1T(c). Gain or loss from a transaction that is treated as capital gain or loss under section 988(a)(1)(B) is not foreign currency gain or loss as defined in paragraph (g), but is gain or loss from the sale or exchange of property which is included in the computation of foreign personal holding company income under this paragraph (e)(1). Paragraphs (e) (4) and (5) of this section provide specific rules for determining whether gain or loss from dispositions of debt instruments and dispositions of options or similar property must be included in the computation of foreign personal holding company income under this paragraph (e)(1). A loss that is deferred or that otherwise may not be taken into account under any provision of the Code may not be taken into account for purposes of determining foreign personal holding company income under any provision of this paragraph (e). (ii) Dual character property. (2) Property that gives rise to certain income In general. (ii) Exception. (A) Dealer property (as defined in paragraph (a)(4)(iv) of this section), and (B) Inventory and similar property (as defined in paragraph (a)(4)(ii) of this section) other than securities. (3) Property that does not give rise to income. (i) Property that gives rise to dividends, interest, rents, royalties and annuities described in paragraph (e)(2) of this section and property that gives rise to rents and royalties derived in the active conduct of a trade or business under paragraph (b)(5) of this section; (ii) Dealer property (as defined in paragraph (a)(4)(iv) of this section); (iii) Inventory and similar property (as defined in paragraph (a)(4)(ii)) other than securities; (iv) Property (other than real property) used in the controlled foreign corporation's trade or business that is of a character which would be subject to the allowance for depreciation under section 167 or 168 and the regulations thereunder (including tangible property described in § 1.167(a)-2 and intangibles described in § 1.167(a)-3); (v) Real property that does not give rise to rental or similar income, to the extent used in the controlled foreign corporation's trade or business; and (vi) Intangible property as defined in section 936(h)(3)(B) and goodwill that is not subject to the allowance for depreciation under section 167 and the regulations thereunder to the extent used in the controlled foreign corporation's trade or business and disposed of in connection with the sale of a trade or business of the controlled foreign corporation. (4) Classification of gain or loss from the disposition of a debt instrument or on a deferred payment sale Gain. (A) It is treated as interest income (as defined in paragraph (a)(4)(i) of this section); or (B) It is treated as income equivalent to interest under paragraph (h) of this section. (ii) Loss. (A) It is directly allocated to interest income (as defined in paragraph (a)(4)(i) of this section) or income equivalent to interest (as defined in paragraph (h) of this section) under any provision of the Code or regulations thereunder; (B) It is required to be apportioned in the same manner as interest expense under section 864(e) or any other provision of the Code or regulations thereunder; or (C) The debt instrument was taken in consideration for the sale or exchange of property (or the provision of services) by the controlled foreign corporation and gain or loss from that sale or exchange (or income from the provision of services) is not includible in foreign base company income under this section. (5) Classification of options and other rights to acquire or transfer property. (6) Classification of certain interests in pass through entities. (f) Commodities transactions In general. (2) Definitions Commodity. (A) Tangible personal property of a kind which is actively traded or with respect to which contractual interests are actively traded, and (B) Nonfunctional currency (as defined under section 988 and the regulations thereunder). (ii) Commodities transaction. (A) A futures or forward contract in a commodity, (B) A leverage contract in a commodity purchased from leverage transaction merchants, (C) An exchange of futures for physical transaction, (D) A transaction in which the income or loss to the parties is measured by reference to the price of a commodity, a pool of commodities, or an index of commodities, (E) The purchase or sale of an option or other right to acquire or transfer a commodity, a futures contract in a commodity, or an index of commodities, and (F) The delivery of one commodity in exchange for the delivery of another commodity, the same commodity at another time, cash, or nonfunctional currency. (3) Definition of the term “qualified active sales” In general. (ii) Sale of commodities. (iii) Active conduct of a commodities business. (A) It holds commodities as inventory or similar property (as defined in paragraph (a)(4)(ii)); and (B) It incurs substantial expenses in the ordinary course of a commodities business from engaging in one of the following activities directly, and not through an independent contractor: ( 1 ( 2 ( 3 For purposes of this paragraph (f), a corporation is not engaged in a commodities business as a producer, processor, merchant, or handler of commodities if its business is primarily financial. In general, the business of a controlled foreign corporation is financial if it primarily engages in commodities transactions for investment or speculation, or if it primarily provides products or services to customers for investment or speculation. (iv) Substantially all. (4) Definition of the term “qualified hedging transaction.” (i) Is reasonably necessary to the conduct of business as a producer, processor, merchant or handler of a commodity in the manner in which such business is customarily and usually conducted by others; (ii) Is entered into primarily to reduce the risk of price change (but not the risk of currency fluctuations) with respect to commodities sold or to be sold in qualified active sales described in paragraph (f)(3) of this paragraph; and (iii) Is clearly identified on the controlled foreign corporation's records before the close of the fifth day after the day during which the hedging transaction is entered into and at a time when there is a reasonable risk of loss; however, if the controlled foreign corporation does not at such time specifically and properly identify the qualified active sales (or category of such sales) to which a hedging transaction relates, the district director in his sole discretion may determine which hedging transactions (if any) are related to qualified active sales. (g) Foreign currency gain In general. (2) Exceptions Qualified business units using the dollar approximate separate transactions method. (ii) Tracing to exclude foreign currency gain or loss from qualified business and hedging transactions. (iii) Election out of tracing. (3) Definition of the term “qualified business transaction” In general. (A) Does not have investment or speculation as a significant purpose; (B) Is not attributable to property or an activity of the kind that gives rise to subpart F income (other than foreign currency gain under this paragraph (g)), or could reasonably be expected to give rise to subpart F income (including upon disposition); for example, the transaction may not be attributable to stock or debt of another corporation (including related corporations organized and operating in the same country), or property likely to give rise to foreign base company sales or services income; and (C) Is attributable to business transactions described in subdivision (ii) of this paragraph (g)(3). A qualified business transaction includes the disposition of a debt instrument that constitutes inventory property under paragraph (a)(4)(ii) or dealer property under paragraph (a)(4)(iv) of this section. The provisions of this paragraph (g)(3) do not apply to the foreign currency gain or loss of a qualified business unit (as determined under § 1.985-3T(d)(2)) included in the computation of gain or loss under paragraph (g)(2)(i) of this section. The provisions of this paragraph (g)(3) do, however, apply to other currency transactions of a qualified business unit that elects (or is deemed to elect) the U.S. dollar as its functional currency under section 985(b)(3) and § 1.985-2T. Qualified business transactions and the amount of foreign currency gain or loss derived therefrom must be clearly identified on its records by the controlled foreign corporation. If the controlled foreign corporation is unable to specifically identify the qualified business transactions and the foreign currency gain or loss derived therefrom, the district director in his sole discretion may determine which transactions of the corporation giving rise to the foreign currency gains or losses are attributable to qualified business transactions. (ii) Specific business transactions. (A) Acquisition of debt instruments. ( 1 ( 2 For purposes of this paragraph (g)(3)(ii)(A), a debt instrument will not be considered derived in the ordinary course of regular business operations unless the instrument matures, and is reasonably expected to be satisfied, within the period for which interest need not be charged under section 482 and the regulations thereunder. (B) Becoming the obligor under debt instruments. ( 1 ( 2 ( 3 ( 4 The identification requirements of subdivision (i) of this paragraph (g)(3) will not be met with respect to a borrowing if the controlled foreign corporation fails to clearly identify the debt and the expenses (or categories of expenses) to which it relates before the close of the fifth day after the day on which the expenses are incurred. (C) Accrual of any item of gross income. ( 1 ( 2 (D) Accrual of any item of expense. ( 1 ( 2 (E) Entering into forward contracts, futures contracts, options and similar instruments. (F) Disposition of nonfunctional currency. (G) Transactions in business assets. (4) Definition of the term “qualified hedging transaction” In general. (A) The transaction must be reasonably necessary to the conduct of regular business operations in the manner in which such business operations are customarily and usually conducted by others. (B) The transaction must be entered into primarily to reduce the risk of currency fluctuations with respect to property or services sold or to be sold or expenses incurred or to be incurred in transactions that are qualified business transactions under paragraph (g)(3) of this section. (C) The hedging transaction and the property or expense (or category of property or expense) to which it relates must be clearly identified on the records of the controlled foreign corporation before the close of the fifth day after the day during which the hedging transaction is entered into and at a time during which there is a reasonable risk of currency loss. (D) The amount of foreign currency gain or loss that is attributable to a specific hedging transaction must be clearly identifiable on the records of the controlled foreign corporation or its controlling shareholder (as defined in § 1.964-1(c)(5)). The provisions of this paragraph (g)(4) do not apply to transactions of a qualified business unit included in the computation of gain or loss under paragraph (g)(2)(i). The provisions of this paragraph (g)(4) do apply, however, to other currency transactions of a qualified business unit that elects (or is deemed to elect) the U.S. dollar as its functional currency under section 985(b)(3) and § 1.985-3T. If the controlled foreign corporation does not specifically identify the qualified business transactions (or category of qualified business transactions) to which a hedging transaction relates or is unable to specifically identify the amount of foreign currency gain or loss derived from the hedging transactions, the district director in his sole discretion may make the identifications required of the controlled foreign corporation and determine which hedging transactions (if any) are related to qualified business transactions, and the amount of foreign currency gain or loss attributable to the qualified hedging transactions. (ii) Change in purpose of hedging transaction. i.e., (5) Election out of tracing In general. (ii) Exception. (iii) Procedure In general. (B) Time and manner. ( 1 ( 2 ( 3 Each United States shareholder or controlled foreign corporation filing the election must provide copies of the election to all controlled foreign corporations for which the election is effective, and all United States shareholders of such corporations. However, failure to provide such copies will not void (or cause to be voidable) an election under this paragraph (g)(5). (C) Termination. (h) Income equivalent to interest In general. (i) An investment, or series of integrated transactions which include an investment, in which the payments, net payments, cash flows, or return predominantly reflect the time value of money, and (ii) Transactions in which the payments or a predominant portion thereof are in substance for the use or forebearance of money, but are not generally treated as interest. However, amounts treated as interest under section 954(c)(1)(A) and paragraph (b) of this section are not income equivalent to interest under this paragraph (h). Income from the sale of property will not be treated as income equivalent to interest for purposes of this paragraph (h), subject to the rule of paragraph (h)(4) of this section, unless the sale is part of an integrated transaction that gives rise to interest or income equivalent to interest. See sections 482, 483 and 1274 for the extent to which such income may be characterized as interest income subject to paragraph (b) of this section. Income equivalent to interest for purposes of this paragraph (h) includes all income attributable to a transfer of securities subject to section 1058. Income equivalent to interest also includes a portion of certain deferred payments received for the purpose of services, in accordance with the provisions of paragraph (h)(5) of this section. Income equivalent to interest does not include income attributable to notional principal contracts such as interest rate swaps, currency swaps, interest rate floor agreements, or similar contracts except to the extent that such contracts are part of an integrated transaction that gives rise to income equivalent to interest. Income derived from notional contracts by a person acting in its capacity as a regular dealer in such contracts will be presumed not to be integrated with an investment. (2) Illustrations. Example 1. CFC, a controlled foreign corporation, promises that A, A CFC CFC A. Example 2. (i) At the beginning of its current taxable year, CFC, A CFC B (ii) During its current taxable year, CFC A CFC B. Example 3. (i) At the beginning of its 1988 taxable year, CFC, A CFC CFC B, B CFC CFC CFC B CFC (ii) CFC B, B. CFC A. B B. A B Example 4. The facts are the same as in Example 3, except that CFC B CFC Example 5. (i) CFC, A CFC A A CFC (ii) The transaction is in substance a loan from CFC A CFC Example 6. (i) CFC (ii) The $100 paid on the spot purchase of commodity Y offsets any market risk on the forward sale so that the $4 of income to be derived predominantly reflects time value of money. Thus, under paragraph (h)(1)(i), the spot purchase of commodity Y and the offsetting forward sale will be treated as an integrated transaction giving rise to $4 of income equivalent to interest. (3) Income equivalent to interest from factoring General rule. (ii) Exceptions. (A) Income treated as interest under section 864(d)(1) or (6) and the regulations thereunder (relating to income derived from trade or service receivables of related persons), even if such income is not treated as described in section 864(d)(1) by reason of the same-country exception of section 864(d)(7); (B) Income derived from a factored receivable if payment for the acquisition of the receivable is made on or after the date on which stated interest begins to accrue, but only if the rate of stated interest equals or exceeds 120 percent of the Federal short term rate (as defined under section 1274) (or the equivalent rate for a currency other than the dollar) as of the date on which the receivable is acquired by the foreign corporation; or (C) Income derived from a factored receivable if payment for the acquisition of the receivable by the foreign corporation is made only on or after the anticipated date of payment of all principal by the obligor (or the anticipated weighted average date of payment of a pool of purchased receivables). (iii) Factored receivable. (iv) Illustrations. Example 1. DP, a domestic corporation, owns all of the outstanding stock of FS, a controlled foreign corporation. FS acquires accounts receivable arising from the sale of property by unrelated corporation X. The receivables have a face amount of $100, and after 30 days bear stated interest equal to at least 120 percent of the applicable short term Federal rate (determined as of the date the receivable is acquired). FS purchases the receivables from X for $95 on Day 1 and collects $100 from the obligor under the receivable on Day 40. Income (other than stated interest) derived by FS from the factored receivables is factoring income within the meaning or paragraph (h)(3)(i) of this section and, therefore, is income equivalent to interest. Example 2. The facts are the same as in example 1, except that FS does not pay X for the receivables until Day 30. Income derived by FS from the factored receivables is not factoring income by reason of paragraph (h)(3)(ii)(B) of this section. Example 3. The facts are the same as in example 2, except that it is anticipated that all principal will be paid by the obligor of the receivables by Day 30. Income derived by FS from this “maturity factoring” of the receivables is not factoring income by reason of paragraph (h)(3)(ii)(C) of this section, and therefore does not give rise to income equivalent to interest. Example 4. The facts are the same as in example 1, except that, rather than collecting $100 from the obligor under the factored receivable on Day 40, FS sells the receivable to controlled foreign corporation Y on Day 15 for $97. Both the income derived by FS on the factored receivable and the income derived by Y (other than stated interest) on the receivable are factoring income within the meaning of paragraph (h)(3)(i) of this section, and therefore, constitute income equivalent to interest. Example 5. The facts are the same as in example 4, except that FS sells the factored receivable to Y for $99 on Day 45, at which time interest is accruing on the unpaid balance of $100. FS has $4 of net factoring income that is income equivalent to interest. Because interest was accruing at the time Y acquired the receivable at a rate equal to at least 120 percent of the applicable short term Federal rate, income derived by Y from the factored receivable is not factoring income by reason of pargraph (h)(3)(ii)(B). Example 6. DP, a domestic corporation engaged in an integrated credit card business, owns all of the outstanding stock of FS, a controlled foreign corporation. On Day 1 individual A uses a credit card issued by DP to purchase shoes priced at $100 from X, a foreign corporation unrelated to DP, FS, or A. By prearrangement with DP, on Day 7, X transfers the receivable arising from A's purchase to FS in exchange for $95. FS collects $100 from A on Day 45. Income derived by FS on the factored receivable is factoring income within the meaning of paragraph (h)(3)(i) of this section and, therefore, is income equivalent to interest. (4) Determination of sales income. (5) Receivables arising from performance of services. et seq. (A) Such provisions applied to contracts for the performance of services, (B) The time period referred to in sections 483(c)(1) and 1274(c)(1)(B) were 120 days rather than six months, and (C) The time period referred to in section 483(c)(1)(A) were 120 days rather than one year. [T.D. 8216, 53 FR 27498, July 21, 1988; 53 FR 29801, Aug. 8, 1988, as amended by T.D. 8556, 59 FR 37672, July 25, 1994. Redesignated and amended by T.D. 8618, 60 FR 46530, Sept. 7, 1995]