Internal Revenue Code · 26 U.S.C.

§ 961. Adjustments to basis of stock in controlled foreign corporations and of other property

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).

Cite as 26 U.S.C. § 961

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status: In force
Added: October 16, 1962 by Pub. L. 87–834
Last amended: December 22, 2017 by Pub. L. 115–97
Amendments: 4 dated changes in the source credit
Length: 4 subsections · 722 words · about 3 min to read
Cross-references: cites 6; cited by 5 Code sections and 14 other regulations
Regulations: 2 issued under this section

¶(a) Increase in basis

Under regulations prescribed by the Secretary, the basis of a United States shareholder’s stock in a controlled foreign corporation, and the basis of property of a United States shareholder by reason of which he is considered under section 958(a)(2) as owning stock of a controlled foreign corporation, shall be increased by the amount required to be included in his gross income under section 951(a) with respect to such stock or with respect to such property, as the case may be, but only to the extent to which such amount was included in the gross income of such United States shareholder. In the case of a United States shareholder who has made an election under section 962 for the taxable year, the increase in basis provided by this subsection shall not exceed an amount equal to the amount of tax paid under this chapter with respect to the amounts required to be included in his gross income under section 951(a).

¶(b) Reduction in basis

¶(1) In general

Under regulations prescribed by the Secretary, the adjusted basis of stock or other property with respect to which a United States shareholder or a United States person receives an amount which is excluded from gross income under section 959(a) shall be reduced by the amount so excluded. In the case of a United States shareholder who has made an election under section 962 for any prior taxable year, the reduction in basis provided by this paragraph shall not exceed an amount equal to the amount received which is excluded from gross income under section 959(a) after the application of section 962(d).

¶(2) Amount in excess of basis

To the extent that an amount excluded from gross income under section 959(a) exceeds the adjusted basis of the stock or other property with respect to which it is received, the amount shall be treated as gain from the sale or exchange of property.

¶(c) Basis adjustments in stock held by foreign corporations Under regulations prescribed by the Secretary, if a United States shareholder is treated under section 958(a)(2) as owning stock in a controlled foreign corporation which is owned by another controlled foreign corporation, then adjustments similar to the adjustments provided by subsections (a) and (b) shall be made to—

¶(1) the basis of such stock, and

¶(2) the basis of stock in any other controlled foreign corporation by reason of which the United States shareholder is considered under section 958(a)(2) as owning the stock described in paragraph (1),

but only for the purposes of determining the amount included under section 951 in the gross income of such United States shareholder (or any other United States shareholder who acquires from any person any portion of the interest of such United States shareholder by reason of which such shareholder was treated as owning such stock, but only to the extent of such portion, and subject to such proof of identity of such interest as the Secretary may prescribe by regulations). The preceding sentence shall not apply with respect to any stock to which a basis adjustment applies under subsection (a) or (b).

¶(d) Basis in specified 10-percent owned foreign corporation reduced by nontaxed portion of dividend for purposes of determining loss

If a domestic corporation received a dividend from a specified 10-percent owned foreign corporation (as defined in section 245A) in any taxable year, solely for purposes of determining loss on any disposition of stock of such foreign corporation in such taxable year or any subsequent taxable year, the basis of such domestic corporation in such stock shall be reduced (but not below zero) by the amount of any deduction allowable to such domestic corporation under section 245A with respect to such stock except to the extent such basis was reduced under section 1059 by reason of a dividend for which such a deduction was allowable.

(Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1022; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 105–34, title XI, § 1112(b)(1), Aug. 5, 1997, 111 Stat. 969; Pub. L. 109–135, title IV, § 409(b), Dec. 21, 2005, 119 Stat. 2635; Pub. L. 115–97, title I, § 14102(b)(1), Dec. 22, 2017, 131 Stat. 2192.)

Regulations under this section

Treasury regulations (26 CFR) issued under § 961

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 6 other sections

Cited by 5 Code sections

Cited in 14 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

December 22, 2017Amended by Pub. L. 115–97Parts changed in 2017: (d)
December 21, 2005Amended by Pub. L. 109–135Parts changed in 2005: (c)
August 5, 1997Amended by Pub. L. 105–34Parts changed in 1997: (c)
October 4, 1976Amended by Pub. L. 94–455Parts changed in 1976: (a)
October 16, 1962Added by Pub. L. 87–834

Where it sits in the Code

Nearby sections

§ 957 Controlled foreign corporations; United States persons
§ 958 Rules for determining stock ownership
§ 959 Exclusion from gross income of previously taxed earnings and profits
§ 960 Deemed paid credit for subpart F inclusions
§ 961 Adjustments to basis of stock in controlled foreign corporations and of other property
§ 962 Election by individuals to be subject to tax at corporate rates
§ 963 Repealed
§ 964 Miscellaneous provisions
§ 965 Treatment of deferred foreign income upon transition to participation exemption system of taxation

Official notes

Show the Law Revision Counsel's notes (amendments, effective dates)

Editorial Notes

Amendments

2017—Subsec. (d). Pub. L. 115–97 added subsec. (d).

2005—Subsec. (c). Pub. L. 109–135 amended heading and text of subsec. (c) generally. Prior to amendment, text read as follows: “Under regulations prescribed by the Secretary, if a United States shareholder is treated under section 958(a)(2) as owning any stock in a controlled foreign corporation which is actually owned by another controlled foreign corporation, adjustments similar to the adjustments provided by subsections (a) and (b) shall be made to the basis of such stock in the hands of such other controlled foreign corporation, but only for the purposes of determining the amount included under section 951 in the gross income of such United States shareholder (or any other United States shareholder who acquires from any person any portion of the interest of such United States shareholder by reason of which such shareholder was treated as owning such stock, but only to the extent of such portion, and subject to such proof of identity of such interest as the Secretary may prescribe by regulations).”

1997—Subsec. (c). Pub. L. 105–34 added subsec. (c).

1976—Subsecs. (a), (b)(1). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, § 14102(b)(2), Dec. 22, 2017, 131 Stat. 2192, provided that: “The amendments made by this subsection [amending this section] shall apply to distributions made after December 31, 2017.”

Effective Date of 2005 Amendment

Pub. L. 109–135, title IV, § 409(d), Dec. 21, 2005, 119 Stat. 2636, provided that: “The amendments made by this section [amending this section and sections 6038B, 6411, and 6601 of this title] shall take effect as if included in the provisions of the Taxpayer Relief Act of 1997 [Pub. L. 105–34] to which they relate.”

Effective Date of 1997 Amendment

Pub. L. 105–34, title XI, § 1112(b)(2), Aug. 5, 1997, 111 Stat. 969, provided that: “The amendment made by paragraph (1) [amending this section] shall apply for purposes of determining inclusions for taxable years of United States shareholders beginning after December 31, 1997.”

Dual Resident Companies

Basis adjustments of this section not applicable in certain circumstances involving dual resident companies, see section 6126 of Pub. L. 100–647, set out as a note under section 1502 of this title.