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intended as a change, rather than a clarification, of prior
law.
The subject regulations are intended to be used in
conjunction with certain "operative sections" of the Code
which require the determination of the taxable income of
the taxpayer from specific sources or activities. See
sec. 1.861-8(f)(1), Income Tax Regs. The overall
limitation on the foreign tax credit provided in section
904(a) is one such operative section. See id.
Under the subject regulations, the first step in
determining a taxpayer's taxable income from a particular
source or activity is to categorize the taxpayer's gross
income into different groupings. See sec. 1.861-8(a)(1),
(2), (4), Income Tax Regs. The regulations use the term
"statutory grouping of gross income" to mean the gross
income from a specific source or activity which must first
be determined in order to arrive at taxable income from
such specific source or activity under an operative
section. Sec. 1.861-8(a)(4), Income Tax Regs. Gross
income from other sources or activities is referred to
as the "residual grouping of gross income". Id.
The overall limitation of section 904(a), the
operative section in this case, requires the taxpayer to
determine taxable income from sources without the United
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