[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: 26CFR1.897-9T]

[Page 550-552]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1--INCOME TAXES--Table of Contents
 
Sec. 1.897-9T  Treatment of certain interest in publicly traded corporations, 
definition of foreign person, and foreign governments and international 
organizations (temporary).

    (a) Purpose and scope. This section provides a temporary regulation 
that, if and when adopted as a final regulation will be added as new 
paragraphs (c)(2)(iii)(B), (k), (n) and (q) of Sec. 1.897-1. Paragraph 
(b) of this section would then appear as paragraph (c)(2)(iii)(B) of 
Sec. 1.897-1. Paragraph (c) of this section would then appear as 
paragraph (k) of Sec. 1.897-1. Paragraph (d) of this section would then 
appear as paragraph (n) of Sec. 1.897-1. Paragraph (e) of this section 
would then appear as paragraph (q) of Sec. 1.897-1.
    (b) Any other interest in the corporation (other than an interest 
solely as a creditor) if on the date such interest was acquired by its 
present holder it had a fair market value greater than the fair market 
value on that date of 5 percent of the regularly traded class of the 
corporation's stock with the lowest fair market value. However, if a 
non-regularly traded class of interests in the corporation is 
convertible into a regularly traded class of interests in the 
corporation, an interest in such non-regularly traded class shall be 
treated as a U.S. real property interest if on the date it was acquired 
by its present holder it had a fair market value greater than the fair 
market value on that date of 5 percent of the regularly traded class of 
the corporation's stock into which it is convertible. If a person holds 
interests in a corporation of a class that is not regularly traded, and 
subsequently acquires

[[Page 551]]

additional interests of the same class, then all such interests must be 
aggregated and valued as of the date of the subsequent acquisition. If 
the subsequent acquisition causes that person's interests to exceed the 
applicable limitation, then all such interests shall be treated as U.S. 
real property interests, regardless of when acquired. In addition, if a 
person holds interests in a corporation of separate classes that are not 
regularly traded, and if such interests were separately acquired for a 
principal purpose of avoiding the applicable 5 percent limitation of 
this paragraph, then such interests shall be aggregated for purposes of 
applying that limitation. This rule shall not apply to interests of 
separate classes acquired in transactions more than three years apart. 
For purposes of paragraph (c)(2)(iii) of Sec. 1.897-1, section 318(a) 
shall apply (except that section 318(a)(2)(C) and (3)(C) shall each be 
applied by substituting ``5 percent'' for ``50 percent'').
    (c) Foreign person. The term ``foreign person'' means a nonresident 
alien individual (including an individual subject to the provisions of 
section 877), a foreign corporation as defined in paragraph (1) of this 
section, a foreign partnership, a foreign trust or a foreign estate, as 
such persons are defined respectively by Sec. 1.871-2 and by 7701 and 
the regulations thereunder. A resident alien individual, including a 
nonresident alien with respect to whom there is in effect an election 
under section 6013(g) or (h) to be treated as United States resident, is 
not a foreign person. With respect to the status of foreign governments 
and international organizations, see paragraph (e) of this section.
    (d) Regularly traded--(1) General rule--(i) Trading requirements. A 
class of interests that is traded on one or more established securities 
markets is considered to be regularly traded on such market or markets 
for any calendar quarter during which--
    (A) Trades in such class are effected, other than in de minimis 
quantities, on at least 15 days during the calendar quarter;
    (B) The aggregate number of the interests in such class traded is at 
least 7.5 percent or more of the average number of interests in such 
class outstanding during the calendar quarter; and
    (C) The requirements of paragraph (d)(3) of this section are met.
    (ii) Exceptions--(A) in the case of the class of interests which is 
held by 2,500 or more record shareholders, the requirements of paragraph 
(d)(1)(i)(B) of this section shall be applied by substituting ``2.5 
percent'' for ``7.5 percent''.
    (B) If at any time during the calendar quarter 100 or fewer persons 
own 50 percent or more of the outstanding shares of a class of 
interests, such class shall not be considered to be regularly traded for 
purposes of sections 897, 1445 and 6039C. Related persons shall be 
treated as one person for purposes of this paragraph (d)(1)(ii)(B).
    (iii) Anti-abuse rule. Trades between related persons shall be 
disregarded. In addition, a class of interests shall not be treated as 
regularly traded if there is an arrangement or a pattern of trades 
designed to meet the requirements of this paragraph (d)(1). For example, 
trades between two persons that occur several times during the calendar 
quarter may be treated as an arrangement or a pattern of trades designed 
to meet the requirements of this paragraph (d)(1).
    (2) Interests traded on domestic established securities markets. For 
purposes of sections 897, 1445 and 6039C, a class of interests that is 
traded on an established securities market located in the United States 
is considered to be regularly traded for any calendar quarter during 
which it is regularly quoted by brokers or dealers making a market in 
such interests. A broker or dealer makes a market in a class of 
interests only if the broker or dealer holds himself out to buy or sell 
interests in such class at the quoted price. Stock of a corporation that 
is described in section 851(a)(1) and units of a unit investment trust 
registered under the Investment Company Act of 1940 (15 U.S.C. sections 
80a-1 to 80a-2) shall be treated as regularly traded within the meaning 
of this paragraph.
    (3) Reporting requirement for interests traded on foreign securities 
markets. A class of interests in a domestic corporation that is traded 
on one or more established securities markets located

[[Page 552]]

outside the United States shall not be considered to be regularly traded 
on such market or markets unless such class is traded in registered 
form, and--
    (i) The corporation registers such class of interests pursuant to 
section 12 of the Securities Exchange Act of 1934, 15 U.S.C. section 78, 
or
    (ii) The corporation attaches to its Federal income tax return a 
statement providing the following:
    (A) A caption which states ``The following information concerning 
certain shareholders of this corporation is provided in accordance with 
the requirements of Sec. 1.897-9T.''
    (B) The name under which the corporation is incorporated, the state 
in which such corporation is incorporated, the principal place of 
business of the corporation, and its employer identification number, if 
any;
    (C) The identity of each person who, at any time during the 
corporation's taxable year, was the beneficial owner of more than 5 
percent of any class of interests of the corporation to which this 
paragraph (d)(3) applies;
    (D) The title, and the total number of shares issued, of any class 
of interests so owned; and
    (E) With respect to each beneficial owner of more than 5 percent of 
any class of interests of the corporation, the number of shares owned, 
the percentage of the class represented thereby, and the nature of the 
beneficial ownership of each class of shares so owned.

Interests in a domestic corporation which has filed a report pursuant to 
this paragraph (d)(3)(ii) shall be considered to be regularly traded on 
an established securities market only for the taxable year of the 
corporation with respect to which such a report is filed.
    (4) Coordination with section 1445. For purposes of section 1445, a 
class of interests in a corporation shall be presumed to be regularly 
traded during a calendar quarter if such interests were regularly traded 
within the meaning of this paragraph during the previous calendar 
quarter.
    (e) Foreign governments and international organizations. A foreign 
government shall be treated as a foreign person with respect to U.S. 
real property interests, and shall be subject to sections 897, 1445, and 
6039C on the disposition of a U.S. real property interest except to the 
extent specifically otherwise provided in the regulations issued under 
section 892. An international organization (as defined in section 
7701(a)(18)) is not a foreign person with respect to U.S. real property 
interests, and is not subject to sections 897, 1445, and 6039C on the 
disposition of a U.S. real property interest. Buildings or parts of 
buildings and the land ancillary thereto (including the residence of the 
head of the diplomatic mission) used by the foreign government for a 
diplomatic mission shall not be a U.S. real property interest in the 
hands of the respective foreign government.
    (f) Effective date. Section 1.897-9T with the exception of paragraph 
(e) shall be effective for transfers, exchanges, distributions and other 
dispositions occurring on or after June 6, 1988. Paragraph (e) of this 
section shall be effective for transfers, exchanges, distributions and 
other dispositions occurring on or after July 1, 1986.

[T.D. 8198, 53 FR 16229, May 5, 1988]

              Income From Sources Without the United States

                           foreign tax credit