[Code of Federal Regulations]
[Title 26, Volume 9]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.861-14T]

[Page 228-235]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.861-14T  Special rules for allocating and apportioning certain expenses (other than interest expense) of an affiliated group of corporations (temporary 
          regulations.)

    (a) In general. Section 1.861-11T provides special rules for 
allocating and apportioning interest expense of an affiliated group of 
corporations. The rules of this Sec. 1.861-14T also relate to affiliated 
groups of corporations and implement section 864(e)(6), which requires 
affiliated group allocation and apportionment of expenses other than 
interest which are not directly allocable and apportionable to any 
specific income producing activity or property. In general, the rules of 
this section apply to taxable years beginning after December 31, 1986. 
Paragraph (b) of this section describes the scope of the application of 
the rule for the allocation and apportionment of such expenses of 
affiliated groups of corporations. Such rule is then set forth in 
paragraph (c) of this section. Paragraph (d) of this section contains 
the definition of the term ``affiliated group'' for purposes of this 
section. Paragraph (e) of this section describes the expenses subject to 
allocation and apportionment under the rules of this section. Paragraph 
(f) of this section provides rules concerning the affiliated group 
allocation and apportionment of such expenses in computing the combined 
taxable income of a FSC or DISC and its related supplier. Paragraph (g) 
of this section describes the treatment of losses caused by 
apportionment of such expenses in the case of an affiliated group that 
does not file a consolidated return. Paragraph (h) of this section 
provides rules concerning the treatment of the reserve expenses of a 
life insurance company. Paragraph (j) of this section provides examples 
illustrating the application of this section.
    (b) Scope--(1) Application of section 864(e)(6). Section 864(e)(6) 
and this section apply to the computation of taxable income for purposes 
of computing separate limitations on the foreign tax credit under 
section 904. Section 864(e)(6) and this section also apply in connection 
with section 907 to determine reductions in the amount allowed as a 
foreign tax credit under section 901. Section 864(e)(6) and this section 
also apply to the computation of the combined taxable income of the 
related supplier and a foreign sales corporation (FSC) (under sections 
921 through 927) as well as the combined taxable income of the related 
supplier and a domestic international sales corporation (DISC) (under 
sections 991 through 997).
    (2) Nonapplication of section 864(e)(6). Section 864(e)(6) and this 
section do not apply to the computation of subpart F income of 
controlled foreign corporations (under sections 951 through 964) or the 
computation of effectively connected taxable income of foreign 
corporations.
    (3) Application of section 864(e)(6) to the computation of combined 
taxable income of a possessions corporation and its affiliates. 
[Reserved]
    (c) General rule for affiliated corporations--(1) General rule. (i) 
Except as otherwise provided in paragraph (c)(2) of this section, the 
taxable income of each member of an affiliated group within each 
statutory grouping shall be determined by allocating and apportioning 
the expenses described in paragraph (e) of this section of each member 
according to apportionment fractions which are computed as if all 
members of such group were a single corporation. For purposes of 
determining these apportionment fractions,

[[Page 229]]

any interaffiliate transactions or property that are duplicative with 
respect to the measure of apportionment chosen shall be eliminated. For 
example, in the application of an asset method of apportionment, stock 
in affiliated corporations shall not be taken into account, and loans 
between members of an affiliated group shall be treated in accordance 
with the rules of Sec. 1.861-11T(e). Similarly, in the application of a 
gross income method of apportionment, interaffiliate dividends and 
interest, gross income from sales or services, and other interaffiliate 
gross income shall be eliminated. Likewise, in the application of a 
method of apportionment based on units sold or sales receipts, 
interaffiliate sales shall be eliminated.
    (ii) Except as otherwise provided in this section, the rules of 
Sec. 1.861-8T apply to the allocation and apportionment of the expenses 
described in paragraph (e) of this section. Thus, allocation under this 
paragraph (c) is accomplished by determining, with respect to each 
expense described in paragraph (e), the class of gross income to which 
the expense is definitely related and then allocating the deduction to 
such class of gross income. For this purpose, the gross income of all 
members of the affiliated group must be taken in account. Then, the 
expense is apportioned by attributing the expense to gross income 
(within the class to which the expense has been allocated) which is in 
the statutory grouping and to gross income (within the class) which is 
in the residual grouping. Section 1.861-8T(c)(1) identifies a number of 
factors upon which apportionment may be based, such as comparison of 
units sold, gross sales or receipts, assets used, or gross income. The 
apportionment method chosen must be applied consistently by each member 
of the affiliated group in apportioning the expense when more than one 
member incurred the expense or when members incurred separate portions 
of the expense. The apportionment fraction must take into account the 
apportionment factors contributed by all members of the affiliated 
group. In the case of an affiliated group of corporations that files a 
consolidated return, consolidated foreign tax credit limitations are 
computed for the group in accordance with the rules of Sec. 1.1502-4. 
For purposes of this section the term ``taxpayer'' refers to the 
affiliated group (regardless of whether the group files a consolidated 
return), rather than to the separate members thereof.
    (2) Expenses relating to fewer than all members. An expense relates 
to fewer than all members of an affiliated group if the expense is 
allocable under paragraph (e)(1) of this section to gross income of at 
least one member other than the member that incurred the expense but 
fewer than all members of the affiliated group. The taxable income of 
the member that incurred the expense shall be determined by apportioning 
that expense under the rules of paragraph (c)(1) of this section as if 
the members of the affiliated group that derive gross income to which 
such expense is allocable under paragraph (e)(1) were treated as a 
single corporation.
    (3) Prior application of section 482. The rules of this section do 
not supersede the application of section 482 and the regulations 
thereunder. Section 482 may be applied effectively to deny a deduction 
for an expense to one member of an affiliated group and to allow a 
deduction for that expense to another member of the affiliated group. In 
cases to which section 482 is applied, expenses shall be reallocated and 
reapportioned under section 864(e)(6) and this section after taking into 
account the application of section 482.
    (d)(1) and (2) [Reserved]. For further guidance, see Sec. 1.861-
14(d)(1) and (2).
    (e) Expenses to be allocated and apportioned under this section--(1) 
Expenses not directly traceable to specific income producing activities 
or property. (i) The expenses that are required to be allocated and 
apportioned under the rules of this section are expenses related to 
certain supportive functions, research and experimental expenses, 
stewardship expenses, and legal and accounting expenses, to the extent 
that such expenses are not directly allocable to specific income 
producing activities or property solely of the member of the affiliated 
group that incurred the expense. Interest expense of members of an 
affiliated group of corporations is allocated and apportioned under 
Sec. 1.861-

[[Page 230]]

11T and not under the rules of this section. Expenses that are included 
in inventory costs or that are capitalized are not subject to allocation 
and apportionment under the rules of this section.
    (ii) An item of expense is not considered to be directly allocable 
to specific income producing activities or property solely of the member 
incurring the expense if, were all members of the affiliated group 
treated as a single corporation, the expense would not be considered 
definitely related, within the meaning of Sec. 1.861-8T(b)(2), only to a 
class of gross income derived solely by the member which actually 
incurred the expense. Furthermore, the expense is presumed not to be 
definitely related only to a class of gross income derived solely by the 
member incurring the expense (and is, therefore, presumed not to be 
directly allocable to specific income producing activities or property 
of that member) unless the taxpayer is able affirmatively to establish 
otherwise. As provided in paragraph (c)(1) of this section, expenses 
described in this paragraph (e)(1) generally shall be apportioned by the 
member incurring the expense according to apportionment fractions 
computed as if all members of the affiliated group were a single 
corporation. Under paragraph (c)(2) of this section, however, an expense 
shall be apportioned according to apportionment fractions computed as if 
only some (but fewer than all) members of the affiliated group were a 
single corporation, if the expense is considered allocable to gross 
income of at least one member other than the member incurring the 
expense but fewer than all members of the affiliated group. An item of 
expense shall be considered to be allocable to gross income of fewer 
than all members of the group if, were all members of the affiliated 
group treated as a single corporation, the expense would not be 
considered definitely related within the meaning of Sec. 1.861-8T(b)(2) 
to gross income derived by all members of the group. In such case, the 
expense shall be considered allocable, for purposes of paragraph (c)(2) 
of this section, to gross income of those members of the group that 
generated (or could reasonably be expected to generate) the gross income 
to which the expense would be considered definitely related if the group 
were treated as a single corporation.
    (2) Research and experimental expenses--(i) In general. The 
allocation and apportionment of research and experimental expenses is 
governed by the rules of Sec. 1.861-8T(e)(3). In the case of research 
and experimental expenses incurred by a member of an affiliated group, 
the rules of Sec. 1.861-8T(e)(3) shall be applied as if all members of 
the affiliated group were a single taxpayer. Thus, research and 
experimental expenses shall be allocated to all income of all members of 
the affiliated group reasonably connected with the relevant broad 
product category to which such expenses are definitely related under 
Sec. 1.861-8T(e)(3)(i). If fewer than all members of the affiliated 
group derive gross income reasonably connected with that relevant broad 
product cagetory, then such expenses shall be apportioned under the 
rules of this paragraph (c)(2) only among those members, as if those 
members were a single corporation. See Example (1) of paragraph (j) of 
this section. Such expenses shall then be apportioned, if the sales 
method is used, in accordance with the rules of Sec. 1.861-8T(e)(3)(ii) 
between the statutory grouping (within the class of gross income) and 
the residual grouping (within the class of gross income) taking into 
account the amount of sales of all members of the affiliated group from 
the product category which resulted in such gross income. Section 1.861-
8T(e)(3)(ii)(D), relating to sales of controlled parties, shall be 
applied as if all members of the affiliated group were the ``taxpayer'' 
referred to therein. If either of the optional gross income methods of 
apportionment is used, gross income of all members of the affiliated 
group that generate, have generated, or could reasonably have been 
expected to generate gross income within the relevant class of gross 
income must be taken into account.
    (ii) Expenses subject to the statutory moratorium. The rules of this 
section do not apply to research and experimental expenses allocated 
under section 126 of Pub. L. 98-368.
    (3) Expenses related to supportive functions. Expenses which are 
supportive in

[[Page 231]]

nature (such as overhead, general and administrative, supervisory 
expenses, advertising, marketing, and other sales expenses) are to be 
allocated and apportioned in accordance with the rules of Sec. 1.861-
8T(b)(3). To the extent that such expenses are not directly allocable 
under paragraph (e)(1)(ii) of this section to specific income producing 
activities or property of the member of the affiliated group that 
incurred the expense, such expenses must be allocated and apportioned as 
if all members of the affiliated group were a single corporation in 
accordance with the rules of paragraph (c) of this section. 
Specifically, such expenses must be allocated to a class of gross income 
that take into account gross income that is generated, has been 
generated, or could reasonably have been expected to have been generated 
by the members of the affiliated group. If the expenses relate to the 
gross income of fewer than all members of the affiliated group as 
determined under paragraph (c)(2) of this section, then those expenses 
must be apportioned under the rules of paragraph (c)(2) of this section, 
as if those fewer members were a single corporation. See Example (3) of 
paragraph (j) of this section. Such expenses must be apportioned between 
statutory and residual groupings of income within the appropriate class 
of gross income by reference to the apportionment factors contributed by 
the members of the affiliated group that are treated as a single 
corporation.
    (4) Stewardship expenses. Stewardship expenses are to be allocated 
and apportioned in accordance with the rules of Sec. 1.861-8T(e)(4). In 
general, stewardship expenses are considered definitely related and 
allocable to dividends received or to be received from a related 
corporation. If members of the affiliated group, other than the member 
that incurred the stewardship expense, receive or may receive dividends 
from the related corporation, such expense must be allocated and 
apportioned in accordance with the rules of paragraph (c) of this 
section as if all such members of the affiliated group that receive or 
may receive dividends were a single corporation. See Example (4) of 
paragraph (j) of this section. Such expenses must be apportioned between 
statutory and residual groupings of income within the appropriate class 
of gross income by reference to the apportionment factors contributed by 
the members of the affiliated group treated as a single corporation.
    (5) Legal and accounting fees and expenses. Legal and accounting 
fees and expenses are to be allocated and apportioned under the rules of 
Sec. 1.861-8T (e)(5). To the extent that such expenses are not directly 
allocable under paragraph (e)(1)(ii) of this section to specific income 
producing activities or property of the member of the affiliated group 
that incurred the expense, such expenses must be allocated and 
apportioned as if all members of the affiliated group were a single 
corporation. Specifically, such expenses must be allocated to a class of 
gross income that takes into account the gross income which is 
generated, has been generated, or could reasonably have been expected to 
have been generated by the other members of the affiliated group. If the 
expenses relate to the gross income of fewer than all members of the 
affiliated group as determined under paragraph (c)(2) of this section, 
then those expenses must be apportioned under the rules of paragraph 
(c)(2) of this section, as if those fewer members were a single 
corporation. See Example (5) of paragraph (j) of this section. Such 
expenses must be apportioned taking into account the apportionment 
factors contributed by the members of the group that are treated as a 
single corporation.
    (f) Computation of FSC or DISC combined taxable income. In the 
computation under the pricing rules of sections 925 and 994 of the 
combined taxable income of any FSC or DISC and its related supplier 
which are members of an affiliated group, the combined taxable income of 
such FSC or DISC and its related supplier shall be reduced by the 
portion of the expenses of the affiliated group described in paragraph 
(e) of this section that is incurred in connection with export sales 
involving that FSC or DISC. In order to determine the portion of the 
expenses of the affiliated group that is incurred in connection with 
export sales by or through a FSC or DISC, the portion of the total of 
the

[[Page 232]]

apportionment factor chosen that relates to the generation of that 
export income must be determined. Thus, if gross income is the 
apportionment factor chosen, the portion of total gross income of the 
affiliated group that consists of combined gross income derived from 
transactions involving the FSC or DISC and related supplier must be 
determined. Similarly, if units sold or sales receipts is the 
apportionment factor chosen, the portion of total units sold or sales 
receipts that generated export income of the FSC or DISC and related 
supplier must be determined. The amount of the expense shall then be 
multiplied by a fraction, the numerator of which is the export related 
apportionment factor as determined above, and the denominator of which 
is the total apportionment factor. Thus, if gross income is the 
apportionment factor chosen, apportionment is based on a fraction, the 
numerator of which is export related combined gross income of the FSC or 
DISC and related supplier and the denominator of which is the total 
gross income of the affiliated group. Similarly, if units sold or sales 
receipts is the apportionment factor chosen, the fraction is the units 
sold or sales receipts that generated export income of the FSC or DISC 
and related supplier over the total units sold or sales receipts of the 
affiliated group. Under this rule, expenses of other group members may 
be attributed to the combined gross income of a FSC of DISC and its 
related supplier without affecting the amount of expenses (other than 
any commission payable by the related supplier to the FSC or DISC) 
otherwise deductible by the FSC or DISC, the related supplier, or other 
members of the affiliated group. The FSC or DISC must calculate combined 
taxable income, taking into account any reduction by expenses attributed 
from other members of the affiliated group to determine the commission 
derived by the FSC or DISC or the transfer price of qualifying export 
property sold to the FSC or DISC.
    (g) Losses created through apportionment. In the case of an 
affiliated group that does not file a consolidated return, the taxable 
income in any separate limitation category must be adjusted under this 
paragraph (g) for purposes of computing the separate foreign tax credit 
limitations under section 904(d). As a consequence of the affiliated 
group allocation and apportionment of expenses required by section 
864(e)(6) and this section, expenses of a group member may be 
apportioned for section 904 purposes to a limitation category with a 
consequent loss in that limitation category. For purposes of this 
paragraph, the term ``limitation category'' includes domestic source 
income, as well as the types of income described in section 904(d)(1) 
(A) through (I). A loss of one affiliate in a limitation category will 
reduce the income of another member in the same limitation category if a 
consolidated return is filed. (See Sec. 1.1502-4.) If a consolidated 
return is not filed, this netting does not occur. Accordingly, in such a 
case, the following adjustments among members are required, in order to 
give effect to the group allocation of expense:
    (1) Losses created through group apportionment of expense in one or 
more limitation categories within a given member must be eliminated; and
    (2) A corresponding amount of income of other members in the same 
limitation category must be recharacterized.

Such adjustments shall be accomplished in accordance with the rules of 
Sec. 1.861-11T(g).
    (h) Special rule for the allocation of reserve expenses of a life 
insurance company. An amount of reserve expenses of a life insurance 
company equal to the dividends received deduction that is disallowed 
because it is attributable to the policyholders' share of dividends 
received shall be treated as definitely related to such dividends. The 
remaining reserve expenses of such company shall be allocated and 
apportioned under the rules of Sec. 1.861-8 and this section.
    (i) [Reserved]
    (j) Examples. The rules of this section may be illustrated by the 
following examples. All of these examples assume that section 482 has 
not been applied by the Commissioner.

    Example 1: (i) Facts. P owns all of the stock of X and all of the 
stock of Y. P, X and Y are domestic corporations. P is a holding company 
for the stock of X and Y. Both X and Y

[[Page 233]]

manufacture and sell a product which is included in a broad product 
category listed in Sec. 1.861-8(e)(3)(i). During 1988, X incurred 
$100,000 on research connected with that product. All of the research 
was performed in the United States. In 1988, the domestic sales by X of 
the product totalled $400,000 and the foreign sales of the product 
totalled $200,000; Y's domestic sales of the product totalled $200,000 
and Y's foreign sales of the product totalled $200,000. In 1988, X's 
gross income is $300,000, of which $200,000 is from domestic sales and 
$100,000 is from foreign sales; Y's gross income is $200,000 of which 
$100,000 is from domestic sales and $100,000 is from foreign sales.
    (ii) P, X and Y are affiliated corporations within the meaning of 
section 864(e)(5) and this section. The research expenses incurred by X 
are allocable to all income connected with the relevant broad category 
listed in Sec. 1.861-8T(e)(3)(i). Both X and Y have gross income 
includible within the class of gross income related to that product 
category. Accordingly, the research and experimental expenses incurred 
by X are to be allocated and apportioned as if X and Y were a single 
corporation. The apportionment for 1988 is as follows:

              Tentative Apportionment on the Basis of Sales

Research expenses to be  apportioned............................$100,000
Exclusive apportionment to United States source gross income.....$30,000
Research expense to be apportioned on the basis of sales.........$70,000

Apportionment of research expense to foreign source general limitation 
income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.018

Apportionment of research expense to United States source gross income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.019

Total apportioned deduction for research........................$100,000

Of which--

Apportioned to foreign source gross income.......................$28,000
Apportioned to U.S. source gross income ($30,000+$42,000)........$72,000

          Tentative Apportionment on the Basis of Gross Income

Research expense apportioned to foreign source gross income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.020

Research expense apportioned to United States income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.021

    Example 2: (i) Facts. P owns all of the stock of X, which owns all 
of the stock of Y. P, X and Y are all domestic corporations. P has 
incurred general training program expenses of $100,000 in 1987. 
Employees of P, X and Y participate in the training program. In 1987, P 
had United States source gross income of $200,000 and foreign source 
general limitation income of $200,000; X had U.S. source gross income of 
$100,000 and foreign source general limitation income of $100,000; and Y 
had U.S. source gross income of $300,000 and foreign source general 
limitation income of $100,000.
    (ii) Analysis. P, X and Y are an affiliated group of corporations 
within the meaning of section 864(e)(5). The training expenses incurred 
by P are not definitely related solely to specific income producing 
activities or property of P. The employees of X and Y also participate 
in the training program. Thus, this expense relates to gross income 
generated by P, X and Y. This expense is definitely related and 
allocable to all of the

[[Page 234]]

gross income from foreign and domestic sources of P, X and Y. It is 
assumed that apportionment on the basis of gross income is reasonable. 
The apportionment of the expense is as follows:

Apportionment of $100,000 expense to foreign source general limitation 
income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.022

Apportionment of $100,000 expense to United States source gross income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.023

Total apportioned expense.......................................$100,000
    Example 3: (i) Facts. The facts are the same as in Example (2) 
above, except that only employees of P and X participate in the training 
program.
    (ii) Analysis. Because only the employees of P and X participate in 
the training program and they perform no services for Y, the expense 
relates only to gross income generated by P and X. Accordingly, the 
$100,000 expense must be allocated and apportioned as if P and X were a 
single corporation. The apportionment of the $100,000 expense is as 
follows:

Apportionment of $100,000 expense to foreign source general limitation 
income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.024

Apportionment of $100,000 expense to U.S. source gross income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.025

    Example 4: (i) Facts. P owns all of the stock of X which owns all of 
the stock of Y. P and X are domestic corporations; Y is a foreign 
corporation. In 1987 P incurred $10,000 of stewardship expenses relating 
to an audit of Y.
    (ii) Analysis. The stewardship expenses incurred by P are not 
directly allocable to specific income producing activities or property 
of P. The expense is definitely related and allocable to dividends 
received or to be received by X. Accordingly, the expense of P is 
allocated and apportioned as if P and X were a single corporation. The 
expense is definitely related to dividends received or to be received by 
X from Y, a foreign corporation. Such dividends are foreign source 
general limitation income. Thus, the entire amount of the expense must 
be allocated to foreign source dividend income.
    Example 5: (i) Facts. P owns all of the stock of X which owns all of 
the stock of Y. P, X and Y are all domestic corporations. In 1987, P 
incurred $10,000 legal expense relating to the testimony of certain 
employees of P in connection with litigation to which Y is a party. This 
expense is not allocable to specific income of Y. In 1987, Y had 
$100,000 foreign source general limitation income and $300,000 U.S. 
source gross income.
    (ii) Analysis. The legal expenses incurred by P are not definitely 
related solely to specific income producing activities or property of P. 
The expense is definitely related and allocable to the class of gross 
income which includes only gross income generated by Y. Accordingly, the 
expense of P is allocated and apportioned as if Y were the only member 
of the affiliated group, as follows:

Apportionment of legal expenses to foreign source general limitation 
income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.026

Apportionment of legal expenses to U.S. source gross income:
[GRAPHIC] [TIFF OMITTED] TC07OC91.027

    Example 6: (i) Facts. P owns all of the stock of R, which owns all 
of the stock of F. P and

[[Page 235]]

R are domestic corporations, and F is a foreign sales corporation under 
section 922 of the Code. R and F have entered into an agreement whereby 
F is paid a commission with respect to sales of product A. In 1987, P 
had gross receipts of $1,000,000 from domestic sales of product A, and 
gross receipts of $1,000,000 from foreign sales of product A. R had 
gross receipts of $1,000,000 from domestic sales of product A, and 
$1,000,000 from export sales of product A. R's cost of goods sold 
attributable to export sales is $500,000. R has deductible expenses of 
$100,000 directly related to its export sales, and F has such deductible 
expenses of $100,000. During 1987, P incurred an expense of $100,000 for 
marketing studies involving the worldwide market for product A.
    (ii) Analysis. P and R are an affiliated group of corporations 
within the meaning of section 864(e)(5) and this section. The expense 
incurred by P for marketing studies regarding the worldwide market for 
product A is an expense that is not directly related solely to the 
activities of P, but also to the activities of R. This expense must be 
allocated and apportioned under the rules of paragraph (c)(1) of this 
section, as if P and R were a single corporation. The expense is 
allocable to the class of gross income that includes all gross income 
generated by sales of product A. Apportionment on the basis of gross 
receipts is reasonable under these facts. F, a foreign corporation, is 
not a member of the affiliated group. However, for purposes of 
determining F's commission on its sales, the combined gross income of F 
and R must be reduced by the portion of the marketing studies expense of 
P that is incurred in connection with export sales involving F under the 
rules of paragraph (f) of this section. The computation of the combined 
taxable income of R and F is as follows:

                   Combined Taxable Income of R and F

R's gross receipts from export sales.......................   $1,000,000
  R's cost of goods sold...................................     $500,000
                                                            ------------
Combined Gross Income......................................     $500,000
                                                            ------------
Less:
  R's other deductible expenses............................     $100,000
  F's other deductible expenses............................      100,000
  Apportionment of P's expense:


  [GRAPHIC] [TIFF OMITTED] TC07OC91.028
  

      Total..................................................   $225,000
                                                              ----------
Combined Taxable Income......................................   $275,000
                                                              ==========



[T.D. 8228, 53 FR 35501, Sept. 14, 1988, as amended by T.D. 8916, 65 FR 
274, Jan. 3, 2001]