(a) In general. Citizens of the United States, domestic corporations, and certain aliens resident in the United States or Puerto Rico may choose to claim a credit, as provided in section 901, against the tax imposed by chapter 1 of the Internal Revenue Code (Code) for taxes paid or accrued to foreign countries and possessions of the United States, subject to the conditions prescribed in paragraphs (a)(1) through (a)(3) and paragraph (b) of this section.
(1) Citizen of the United States. A citizen of the United States, whether resident or nonresident, may claim a credit for--
(i) The amount of any income, war profits, and excess profits taxes paid or accrued during the taxable year to any foreign country or to any possession of the United States; and
(ii) His share of any such taxes of a partnership of which he is a member, or of an estate or trust of which he is a beneficiary.
(2) Domestic corporation. A domestic corporation may claim a credit for--
(i) The amount of any income, war profits, and excess profits taxes paid or accrued during the taxable year to any foreign country or to any possession of the United States;
(ii) Its share of any such taxes of a partnership of which it is a member, or of an estate or trust of which it is a beneficiary; and
(iii) The taxes deemed to have been paid under section 902 or 960.
(3) Alien resident of the United States or Puerto Rico. Except as provided in a Presidential proclamation described in section 901(c), an alien resident of the United States, or an alien individual who is a bona fide resident of Puerto Rico during the entire taxable year, may claim a credit for--
(i) The amount of any income, war profits, and excess profits taxes paid or accrued during the taxable year to any foreign country or to any possession of the United States; and
(ii) His distributive share of any such taxes of a partnership of which he is a member, or of an estate or trust of which he is a beneficiary.
(b) Limitations. Certain Code sections, including sections 814, 901(e) through (m), 904, 906, 907, 908, 909, 911, 999, and 6038, limit the credit against the tax imposed by chapter 1 of the Code for certain foreign taxes.
(c) Deduction denied if credit claimed. If a taxpayer chooses with respect to any taxable year to claim a credit for taxes to any extent, such choice will be considered to apply to income, war profits, and excess profits taxes paid or accrued in such taxable year to all foreign countries and possessions of the United States, and no portion of any such taxes shall be allowed as a deduction from gross income in such taxable year or any succeeding taxable year. See section 275(a)(4).
(d) Period during which election can be made or changed. The taxpayer may, for a particular taxable year, claim the benefits of section 901 (or claim a deduction in lieu of a foreign tax credit) at any time before the expiration of the period prescribed by section 6511(d)(3)(A) (or section 6511(c) if the period is extended by agreement).
(e) Joint return. In the case of a husband and wife making a joint return, credit for taxes paid or accrued to any foreign country or to any possession of the United States shall be computed upon the basis of the total taxes so paid by or accrued against the spouses.
(f) Taxes against which credit not allowed-- The credit for taxes shall be allowed only against the tax imposed by chapter 1 of the Code, but it shall not be allowed against the following taxes imposed under that chapter:
(1) The minimum tax for tax preferences imposed by section 56;
(2) The 10 percent tax on premature distributions to owner-employees imposed by section 72(m)(5)(B);
(3) The tax on lump sum distributions imposed by section 402(e);
(4) The additional tax on income from certain retirement accounts imposed by section 408(f);
(5) The tax on accumulated earnings imposed by section 531;
(6) The personal holding company tax imposed by section 541;
(7) The additional tax relating to war loss recoveries imposed by section 1333; and
(8) The additional tax relating to recoveries of foreign expropriation losses imposed by section 1351.
(g) Taxpayers to whom credit not allowed. Among those to whom the credit for taxes is not allowed are the following:
(1) Except as provided in section 906, a foreign corporation.
(2) Except as provided in section 906, a nonresident alien individual who is not described in section 876 (see sections 874(c) and 901(b)(4)).
(3) A nonresident alien individual described in section 876 other than a bona fide resident (as defined in section 937(a) and the regulations under that section) of Puerto Rico during the entire taxable year (see sections 901(b)(3) and (4)).
(4) A U.S. citizen or resident alien individual who is a bona fide resident of a section 931 possession (as defined in Sec. 1.931-1(c)(1)), the U.S. Virgin Islands, or Puerto Rico, and who excludes certain income from U.S. gross income to the extent of taxes allocable to the income so excluded (see sections 931(b)(2), 933(1), and 932(c)(4)).
(h) Taxpayers denied credit in a particular taxable year. Taxpayers who are denied the credit for taxes for particular taxable years are the following:
(1) An individual who elects to pay the optional tax imposed by section 3, or one who elects under section 144 to take the standard deduction (see section 36);
(2) A taxpayer who elects to deduct taxes paid or accrued to any foreign country or possession of the United States (see sections 164 and 275);
(3) A regulated investment company which has exercised the election under section 853.
(i) Dividends from a DISC treated as foreign. For purposes of sections 901 through 906 and the regulations thereunder, any amount treated as a dividend from a corporation which is a DISC or former DISC (as defined in section 992(a) (1) or (3) as the case may be) will be treated as a dividend from a foreign corporation to the extent such dividend is treated under section 861(a)(2)(D) as income from sources without the United States.
(j) Effective/applicability date. Paragraph (g) of this section applies to taxable years ending after April 9, 2008. Paragraphs (a) and (b) of this section apply to taxable years ending after July 13, 2011. [T.D. 6500, 25 FR 11910, Nov. 26, 1960]
Editorial Note: For Federal Register citations affecting Sec. 1.901-1, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.fdsys.gov.