(a) Taxable years not wholly within the surcharge period. In the case of a taxable year beginning before the surcharge period and ending within the surcharge period, or beginning within the surcharge period and ending after the surcharge period, or beginning before January 1, 1970, and ending after December 31, 1969, section 963(b) provides the method for determining the required minimum distribution. Under the method prescribed in section 963(b) for such years, the required minimum distribution is an amount equal to the sums of:
(1) That portion of the minimum distribution which would be required if the provisions of section 963(b)(1) were applicable to the taxable year, which the number of days in such taxable year which are within the surcharge period and before January 1, 1970, bears to the total number of days in such taxable year.
(2) That portion of the minimum distribution which would be required if the provisions of section 963(b)(2) were applicable to such taxable year, which the number of days in such taxable year which are within the surcharge period and after December 31, 1969, bears to the total number of days in such taxable year, and
(3) That portion of the minimum distribution which would be required if the provisions of section 963(b)(3) were applicable to such taxable year, which the number of days in such taxable year which are not within the surcharge period bears to the total number of days in such taxable year.
(b) Calendar year 1970. For calendar year 1970, the required minimum distribution shall be an amount determined in accordance with the following table: ------------------------------------------------------------------------
The required
minimum
distribution
If the effective foreign tax rate is (percentage)-- of earnings
and profits is
(percentage)--------------------------------------------------------------------------Under 9................................................. 84.9835629 or over but less than 10.............................. 82.96712310 or over but less than 18............................. 80.98356218 or over but less than 19............................. 79.47123319 or over but less than 26............................. 77.48767126 or over but less than 27............................. 73.95890427 or over but less than 32............................. 70.48767132 or over but less than 33............................. 67.46301433 or over but less than 36............................. 63.99178136 or over but less than 37............................. 57.94246637 or over but less than 39............................. 51.99178139 or over but less than 40............................. 44.93424740 or over but less than 41............................. 37.49589041 or over but less than 42............................. 31.44657542 or over but less than 43............................. 19.44657543 or over but less than 44............................. 12.89315144 or over but less than 45............................. 6.44657545 or over.............................................. 0------------------------------------------------------------------------
(c) Surcharge period. For purposes of this section the term ``surcharge period'' means the period beginning January 1, 1968, and ending June 30, 1970.
(d) Illustration of principles. The application of the rules set forth in paragraphs (a), (b), and (c) of this section may be illustrated by the following example. It is assumed that all computations are carried to sufficient accuracy:
(a) M, a domestic corporation, and A, its controlled corporation (the one class of stock of which is wholly owned by M), both have a taxable year beginning December 1, 1969, and ending November 30, 1970. For such taxable year M makes a first-tier election with respect to A corporation. The effective foreign tax rate for such year is 30 percent.
(b) Under section 963(b) and paragraph (b) of this section the surcharge period ends June 30, 1970. Therefore, of the 365 days in the taxable year, 153 days are not within the surcharge period. Of the remaining 212 days, 31 are within the surcharge period and before January 1, 1970 and 181 days are within the surcharge period and after December 31, 1969. If section 963(b)(1) were applicable to the entire taxable year, the required minimum distribution of earnings and profits would be 75 percent. If section 963(b)(2) were applicable to the entire taxable year, the required minimum distribution would be 72 percent. If section 963(b)(3) were applicable to the entire taxable year, the required minimum distribution would be 69 percent.
(c) Under section 963(b) and this section the required minimum distribution of earnings and profits is 71 percent, computed as follows: (75%x31/365)+(72%x181/365) +(69%x153/365)=71%. [T.D. 7100, 36 FR 5336, Mar. 20, 1971]