Income Tax Regulations — 5907
may be, of the shareholder affiliate, (B) to the extent that such loss reduces the hybrid surplus or increases the hybrid deficit of the transparent affiliate, (I) to be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the shareholder affiliate, and (II) to be deducted from the hybrid underlying tax of the shareholder affiliate, and (C) to the extent that such loss reduces the taxable surplus or increases the taxable deficit of the transparent affiliate, (I) to be added to the taxable surplus or deducted from the taxable deficit, as the case may be, of the shareholder affiliate, and (II) to be deducted from the underlying foreign tax of the shareholder affiliate; (b) where, because of the shareholder affiliate being responsible for paying, or claiming a refund of, income or profits tax for the year on behalf of the shareholder affiliate and the transparent affiliate, (i) an amount is paid to the shareholder affiliate by the transparent affiliate in respect of the income or profits tax that would have been payable by the transparent affiliate for the year had it been liable, and no other person had been liable, for income or profits tax in respect of income or profits of the transparent affiliate, (A) in respect of the transparent affiliate, the amount so paid is deemed to be a payment of such income or profits tax for the year, and (B) in respect of the shareholder affiliate, (I) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the exempt surplus or deducted from the exempt deficit of the transparent affiliate is, at the end of the year, to be added to the exempt surplus or deducted from the exempt deficit, as the case may be, of the shareholder affiliate, (II) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the hybrid surplus or deducted from the hybrid deficit of the transparent affiliate is, at the end of the year, to be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the shareholder affiliate and deducted from the hybrid underlying tax of the shareholder affiliate, and (III) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the taxable surplus or deducted from the taxable deficit of the transparent affiliate is, at the end of the year, to be added to the taxable surplus or deducted from the taxable deficit, as the case may be, of the shareholder affiliate and be deducted from the underlying foreign tax of the shareholder affiliate, or (ii) an amount is paid by the shareholder affiliate to the transparent affiliate in respect of a reduction or refund, because of a loss or a tax credit of the transparent affiliate for a taxation year, of the income or profits tax that would otherwise have been payable by the shareholder affiliate for the year on behalf of the shareholder affiliate and the transparent affiliate, (A) in respect of the shareholder affiliate, (I) the portion of the amount so paid that can reasonably be regarded as relating to an amount deducted from the exempt surplus or included in the exempt deficit of the transparent affiliate is, at the end of the year to which the loss or the tax credit relates, to be deducted from the exempt surplus or added to the exempt deficit, as the case may be, of the shareholder affiliate, (II) the portion of the amount so paid that can reasonably be regarded as relating to an amount deducted from the hybrid surplus or included in the hybrid deficit of the transparent affiliate is, at the end of the year of the loss, to be deducted from the hybrid surplus or added to the hybrid deficit, as the case may be, of the shareholder affiliate and added to the hybrid underlying tax of the shareholder affiliate, and (III) the portion of the amount so paid that can reasonably be regarded as relating to an amount deducted from the taxable surplus or included in