26 U.S.C. § 853 — Foreign tax credit allowed to shareholders

(a) General rule A regulated investment company— (1) more than 50 percent of the value (as defined in section 851(c)(4)) of whose total assets at the close of the taxable year consists of stock or securities in foreign corporations, and (2) which meets the requirements of section 852(a) for the taxable year, can, for that taxable year, elect the application of this section about income, war profits, and excess profits taxes described in section 901(b)(1), which are paid by the investment company during that taxable year to foreign countries and possessions of the United States. (b) Effect of election If the election provided in subsection (a) is effective for a taxable year— (1) the regulated investment company— (A) must not, about that taxable year, be allowed a deduction under section 164(a) or a credit under section 901 for taxes to which subsection (a) is applicable, and (B) must be allowed as an addition to the dividends paid deduction for that taxable year the amount of that taxes; (2) each shareholder of that investment company must— (A) include in gross income and treat as paid by him his proportionate share of that taxes, and (B) treat as gross income from sources within the respective foreign countries and possessions of the United States, for purposes of applying subpart A of part III of subchapter N, the sum of his proportionate share of that taxes and the portion of any dividend paid by that investment company which represents income derived from sources within foreign countries or possessions of the United States. (c) Statements to shareholders The amounts to be treated by the shareholder, for purposes of subsection (b)(2), as his proportionate share of— (1) taxes paid to any foreign country or possession of the United States, and (2) gross income derived from sources within any foreign country or possession of the United States, must not exceed the amounts so reported by the company in a written statement furnished to that shareholder. (d) Manner of making election The election provided in subsection (a) must be made in that manner as the Secretary can prescribe by regulations. (e) Treatment of certain taxes not allowed as a credit under section 901 This section must not apply to any tax about which the regulated investment company is not allowed a credit under section 901 by reason of subsection (k) or ( l ) of that section. (f) Cross references (1) For treatment by shareholders of taxes paid to foreign countries and possessions of the United States, see section 164(a) and section 901. (2) For definition of foreign corporation, see section 7701(a)(5).