For this purpose, the term total related person debt means the sum of the principal amounts of obligations of a controlled foreign corporation owed to any United States shareholder of such corporation or to any related entity (within the meaning of paragraph (g) of this section) determined at the end of the taxable year.
If an entity is both a recipient and a payor of income described in any one of the categories described in (k)(2) (i) through (iv) of this section, the income received will be characterized before the income that is paid. In addition, the amount of interest paid or accrued, directly or indirectly, by a person to a related person shall be offset against and eliminate any interest received or accrued, directly or indirectly, by a person from that related person before application of the ordering rules of this paragraph. In a case in which a person pays or accrues interest to a related person, and also receives or accrues interest indirectly from the related person, the smallest interest payment is eliminated and the amount of all other interest payments are reduced by the amount of the smallest interest payment.
Table 1 to Paragraph (m)(3)(i)(A)
Foreign | U.S. | Totals | |
Assets: | |||
Passive | 1,000x | 4,000x | 5,000x |
General | 3,000x | 4,000x | 7,000x |
Total | 4,000x | 8,000x | 12,000x |
Income: | |||
Passive | 20x | 70x | 90x |
General | 650x | 100x | 750x |
Total | 670x | 170x | 840x |
26 C.F.R. §1.904-5
For FEDERAL REGISTER citations affecting § 1.904-5 , see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov.