Treasury Regulations · 26 CFR
§ 1.954-7. Increase in qualified investments in foreign base company shipping operations.
Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).
Regulation under 26 U.S.C. § 954
Cite as 26 CFR § 1.954-7
At a glance
Read from the text and its source citation. Not part of the regulation.
- Status
- In the current eCFR
- Issued
- May 19, 1983 by T.D. 7894
- Issued under
- 26 U.S.C. § 954
- Length
- 1,308 words · about 6 min to read
- Cross-references
- cites 2 Code sections and 6 regulations; cited by 3
(a) Controlled foreign corporation X is a wholly owned subsidiary of domestic corporation M. X uses the calendar year as the taxable year. The amounts of X's qualified investments in foreign base company shipping operations at the close of 1975 through 1979 are as follows:
| Qualified investments at December 31, 1975 | $16,000 |
| Qualified investments at December 31, 1976 | 17,000 |
| Qualified investments at December 31, 1977 | 23,000 |
| Qualified investments at December 31, 1978 | 28,000 |
| Qualified investments at December 31, 1979 | 30,000 |
(b) Assume that M properly files without consent a timely election under § 1.955A-4(b)(1) to determine X's increase for 1976 in qualified investments in foreign base company shipping operations pursuant to this paragraph, and that the election remains in force through 1978. Then X's increases for 1976 through 1978 in qualified investments in foreign base company shipping operations are as follows:
| Increase for 1976 ($23,000 minus $16,000) | $7,000 |
| Increase for 1977 ($28,000 minus $23,000) | 5,000 |
| Increase for 1978 ($30,000 minus $28,000) | 2,000 |
Assume the same facts as in example 1, except that M never files an election under § 1.955A-4(b)(1). X's increases for 1976 through 1978 in qualified investments in foreign base company shipping operations are as follows:
| Increase for 1976 ($17,000 minus $16,000) | $1,000 |
| Increase for 1977 ($23,000 minus $17,000) | 6,000 |
| Increase for 1978 ($28,000 minus $23,000) | 5,000 |
The facts are the same as in example 1, except that X's qualified investments in foreign base company shipping operations include an investment in less developed country shipping companies described in § 1.955-5(b) of $500 on December 31, 1975, and $750 on December 31, 1976. Assume further that M has made an election under section 955(b)(3) (as in effect before the enactment of the Tax Reduction Act of 1975) with respect to X's taxable year 1975. Then X's increase in qualified investments in foreign base company shipping operations for 1976 is $6,750 (i.e., $7,000−$250).
(a) Controlled foreign corporation X uses the calendar year as the taxable year. On December 31, 1975, X's qualified investments in foreign base company shipping operations (determined as provided in § 1.955A-2(g)) consist of the following amounts:
| Cash | $6,000 |
| Readily marketable securities | 1,000 |
| Stock of related controlled foreign corporations | 4,000 |
| Traffic and other receivables | 14,000 |
| Marine insurance claims receivables | 1,000 |
| Foreign income tax refunds receivable | 1,000 |
| Prepaid shipping expenses and shipping inventories ashore | 1,000 |
| Vessel construction funds | 0 |
| Vessels | 123,000 |
| Vessel plans and construction in progress | 3,000 |
| Containers and chassis | 0 |
| Terminal property and equipment | 2,000 |
| Shipping office (land and building) | 1,000 |
| Vessel spare parts ashore | 1,000 |
| Performance deposits | 2,000 |
| Deferred charges | 2,000 |
| Stock of less developed country shipping company described in § 1-955-5(b) | 10,000 |
| 172,000 |
(b) On December 31, 1976, X's qualified investments in foreign base company shipping operations (determined as provided in § 1.955A-2(g)) consists of the following amounts:
| Cash | $5,000 |
| Readily marketable securities | 2,000 |
| Stock of related controlled foreign corporations | 4,000 |
| Traffic and other receivables | 16,000 |
| Foreign income tax refunds receivable | 3,000 |
| Prepaid shipping expenses and shipping inventories ashore | 2,000 |
| Vessel construction funds | 1,000 |
| Vessels | 117,000 |
| Vessel plans and construction in progress | 12,000 |
| Containers and chassis | 4,000 |
| Terminal property and equipment | 2,000 |
| Shipping office (land and building) | 1,000 |
| Vessel spare parts ashore | 1,000 |
| Performance deposits | 2,000 |
| Deferred charges | 2,000 |
| Stock of less developed country shipping company described in § 1.955-5(b) | 0 |
| 174,000 |
(c) For 1976, X's increase in qualified investments in foreign base company shipping operations is $2,000, which amount is determined as follows:
| Qualified investments at Dec. 31, 1976 | $174,000 |
| Qualified investments at Dec. 31, 1975 | 172,000 |
| Increase for 1976 | 2,000 |
[T.D. 7894, 48 FR 22528, May 19, 1983]
Cross-references
Computed from the citations in the text of 26 CFR.
Code sections it cites
Regulations it cites
- § 1.954-1 Foreign base company income.
- § 1.955A-2 Amount of a controlled foreign corporation's qualified investments in foreign base company shipping operations.
- § 1.955A-4 Election as to date of determining qualified investment in foreign base company shipping operations.
- § 1.955-5 Definition of less developed country corporation.
- § 1.954-5 Increase in qualified investments in less developed countries; taxable years of controlled foreign corporations beginning before January 1, 1976.
- § 1.955-3 Election as to date of determining qualified investments in less developed countries.
Cited by 3 other regulations
- § 1.955A-2 Amount of a controlled foreign corporation's qualified investments in foreign base company shipping operations.
- § 1.955A-3 Election as to qualified investments by related persons.
- § 1.955A-4 Election as to date of determining qualified investment in foreign base company shipping operations.
Amendment history
From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.
- Issued by T.D. 7894 (48 FR 22528)
Where it sits in 26 CFR
- Subchapter A Income tax
- Part 1 Income taxes
- Controlled foreign corporations
Nearby sections
- § 1.954-3 Foreign base company sales income.
- § 1.954-4 Foreign base company services income.
- § 1.954-5 Increase in qualified investments in less developed countries; taxable years of controlled foreign corporations beginning before January 1, 1976.
- § 1.954-6 Foreign base company shipping income.
- § 1.954-7 Increase in qualified investments in foreign base company shipping operations.
- § 1.954-8 Foreign base company oil related income.
- § 1.954(c)(6)-1 Certain cases in which section 954(c)(6) exception not available.
- § 1.955-0 Effective dates.
- § 1.955-1 Shareholder's pro rata share of amount of previously excluded subpart F income withdrawn from investment in less developed countries.