SECTION 5. RULES RELATING TO

PARTNERSHIPS AND TRUSTS

.01 Taxes Paid or Accrued by Partnerships

Section 909(c)(1) provides that in the case of a partnership, section 909(a) and (b) will be applied at the partner level. Accordingly, in the case of foreign income taxes paid or accrued by a partnership, the taxes will be treated as pre-2011 split taxes to the extent such taxes are allocated to one or more section 902 corporations and would be pre-2011 split taxes if the partner section 902 corporation had paid or accrued the taxes directly on the date such taxes are included by the section 902 corporation under sections 702 and 706(a). Further, any foreign income taxes subject to section 909 will be suspended in the hands of the partner section 902 corporation.

.02 Taxes Paid or Accrued by Partners

For purposes of applying section 909 in post-2010 taxable years, there will not be

December 27, 2010 921 2010–52 I.R.B.

accrued tax not paid within two years), section 909 will not apply to such taxes.

If a redetermination of foreign tax paid or accrued by a section 902 corporation occurs in a post-2010 taxable year and increases the amount of foreign taxes paid or accrued by the section 902 corporation with respect to a pre-2011 taxable year ( e.g., due to an additional assessment of foreign tax or a payment of a previously accrued tax not paid within two years), such taxes will be treated as pre-2011 taxes. Section 909 will apply to such taxes if they are pre-2011 split taxes. In that case, they will be suspended in the post-2010 taxable year in which they would otherwise be taken into account as a prospective adjustment to the section 902 corporation’s pools of post-1986 foreign income taxes.

.04 Other foreign tax credit provisions

Section 909 does not affect the applicability of other restrictions or limitations on the foreign tax credit under existing law, including the substantiation requirements of section 905(b).