§ 1.163(j)-0 Table of contents. This section lists the table of contents for §§ 1.163(j)-1 through 1.163(j)-11. *§ 1.163(j)-1 Definitions.* ( a ) In general. ( b ) Definitions. ( 1 ) Adjusted taxable income. ( i ) Additions. ( ii ) Subtractions. ( iii ) Depreciation, amortization, or depletion capitalized under section 263A. ( iv ) Application of § 1.163(j)-1(b)(1)(ii)(C), (D), and (E). ( A ) Sale or other disposition. ( 1 ) In general. ( 2 ) Intercompany transactions. ( 3 ) Deconsolidations. ( 4 ) Nonrecognition transactions. ( B ) Deductions by members of a consolidated group. ( 1 ) In general. ( 2 ) Application of the alternative computation method. ( C ) Successor rules. ( 1 ) Successor assets. ( 2 ) Successor entities. ( D ) Anti-duplication rule. ( 1 ) In general. ( 2 ) Adjustments following deconsolidation. ( E ) Alternative computation method. ( 1 ) Alternative computation method for property dispositions. ( 2 ) Alternative computation method for dispositions of member stock. ( 3 ) Alternative computation method for dispositions of partnership interests. ( F ) Cap on negative adjustments. ( 1 ) In general. ( 2 ) Example. ( G ) Treatment of depreciation, amortization, or depletion capitalized under section 263A. ( v ) Other adjustments. ( vi ) Additional rules relating to adjusted taxable income in other sections. ( vii ) ATI cannot be less than zero. ( viii ) Examples. ( 2 ) Applicable CFC. ( 3 ) Business interest expense. ( i ) In general. ( ii ) Special rules. ( 4 ) Business interest income. ( i ) In general. ( ii ) Special rules. ( 5 ) C corporation. ( 6 ) Cleared swap. ( 7 ) Consolidated group. ( 8 ) Consolidated return year. ( 9 ) Current-year business interest expense. ( 10 ) Disallowed business interest expense. ( 11 ) Disallowed business interest expense carryforward. ( 12 ) Disallowed disqualified interest. ( 13 ) Electing farming business. ( 14 ) Electing real property trade or business. ( 15 ) Excepted regulated utility trade or business. ( i ) In general. ( A ) Automatically excepted regulated utility trades or businesses. ( B ) Electing regulated utility trades or businesses. ( C ) Designated excepted regulated utility trades or businesses. ( ii ) Depreciation and excepted and non-excepted utility trades or businesses. ( A ) Depreciation. ( B ) Allocation of items. ( iii ) Election to be an excepted regulated utility trade or business. ( A ) In general. ( B ) Scope and effect of election. ( 1 ) In general. ( 2 ) Irrevocability. ( C ) Time and manner of making election. ( 1 ) In general. ( 2 ) Election statement contents. ( 3 ) Consolidated group's or partnership's trade or business. ( 4 ) Termination of election. ( 5 ) Additional guidance. ( 16 ) Excess business interest expense. ( 17 ) Excess taxable income. ( 18 ) Floor plan financing indebtedness. ( 19 ) Floor plan financing interest expense. ( 20 ) Group. ( 21 ) Intercompany transaction. ( 22 ) Interest. ( i ) In general. ( ii ) Swaps with significant nonperiodic payments. ( A ) In general. ( B ) Exception for cleared swaps. ( C ) Exception for non-cleared swaps subject to margin or collateral requirements. ( iii ) Other amounts treated as interest. ( A ) Treatment of premium. ( 1 ) Issuer. ( 2 ) Holder. ( B ) Treatment of ordinary income or loss on certain debt instruments. ( C ) Substitute interest payments. ( D ) Section 1258 gain. ( E ) Factoring income. ( F ) Section 163(j) interest dividends. ( 1 ) In general. ( 2 ) Limitation on amount treated as interest income. ( 3 ) Conduit amounts. ( 4 ) Holding period. ( 5 ) Exception to holding period requirement for money market funds and certain regularly declared dividends. ( iv ) Anti-avoidance rules. ( A ) Principal purpose to reduce interest expense. ( 1 ) Treatment as interest expense. ( 2 ) Corresponding treatment of amounts as interest income. ( B ) Interest income artificially increased. ( C ) Principal purpose. ( D ) Coordination with anti-avoidance rule in § 1.163(j)-2(j). ( v ) Examples. ( 23 ) Interest expense. ( 24 ) Interest income. ( 25 ) Member. ( 26 ) Motor vehicle. ( 27 ) Old section 163(j). ( 28 ) Ownership change. ( 29 ) Ownership date. ( 30 ) Real estate investment trust. ( 31 ) Real property. ( 32 ) Regulated investment company. ( 33 ) Relevant foreign corporation. ( 34 ) S corporation. ( 35 ) Section 163(j) interest dividend. ( i ) In general. ( ii ) Reduction in the case of excess reported amounts. ( iii ) Allocation of excess reported amount. ( A ) In general. ( B ) Special rule for noncalendar year RICs. ( iv ) Definitions. ( A ) Reported section 163(j) interest dividend amount. ( B ) Excess reported amount. ( C ) Aggregate reported amount. ( D ) Post-December reported amount. ( E ) Excess section 163(j) interest income. ( v ) Example. ( 36 ) Section 163(j) limitation. ( 37 ) Section 163(j) regulations. ( 38 ) Separate return limitation year. ( 39 ) Separate return year. ( 40 ) Separate tentative taxable income. ( 41 ) Tax-exempt corporation. ( 42 ) Tax-exempt organization. ( 43 ) Tentative taxable income. ( i ) In general. ( ii ) [Reserved] ( iii ) Special rules for defining tentative taxable income. ( 44 ) Trade or business. ( i ) In general. ( ii ) Excepted trade or business. ( iii ) Non-excepted trade or business. ( 45 ) Unadjusted basis. ( 46 ) United States shareholder. ( c ) Applicability date. ( 1 ) In general. ( 2 ) Anti-avoidance rules. ( 3 ) Swaps with significant nonperiodic payments. ( i ) In general. ( ii ) Anti-avoidance rule. ( 4 ) Paragraphs (b)(1)(iv)(A)(*2*) through (*4*), (B) through (G), (b)(22)(iii)(F), and (b)(35). § 1.163(j)-2 Deduction for business interest expense limited. ( a ) Overview. ( b ) General rule. ( 1 ) In general. ( 2 ) 50 percent ATI limitation for taxable years beginning in 2019 or 2020. ( 3 ) Election to use 2019 ATI in 2020. ( i ) In general. ( ii ) Short taxable years. ( iii ) Transactions to which section 381 applies. ( iv ) Consolidated groups. ( 4 ) Time and manner of making or revoking the elections. ( c ) Disallowed business interest expense carryforward. ( 1 ) In general. ( 2 ) Coordination with small business exemption. ( 3 ) Cross-references. ( d ) Small business exemption. ( 1 ) Exemption. ( 2 ) Application of the gross receipts test. ( i ) In general. ( ii ) Gross receipts of individuals. ( iii ) Partners and S corporation shareholders. ( iv ) Tax-exempt organizations. ( 3 ) Determining a syndicate's loss amount. ( e ) REMICs. ( f ) Trusts. ( i ) Calculation of ATI with respect to certain trusts and estates. ( ii ) Calculation of ATI with respect to certain beneficiaries. ( g ) Tax-exempt organizations. ( h ) Examples. ( i ) [Reserved] ( j ) Anti-avoidance rule. ( 1 ) In general. ( 2 ) Examples. ( k ) Applicability dates. ( 1 ) In general. ( 2 ) Paragraphs (b)(3)(iii), (b)(3)(iv), and (d)(3). *§ 1.163(j)-3 Relationship of the section 163(j) limitation to other provisions affecting interest.* ( a ) Overview. ( b ) Coordination of section 163(j) with certain other provisions. ( 1 ) In general. ( 2 ) Disallowed interest provisions. ( 3 ) Deferred interest provisions. ( 4 ) At risk rules, passive activity loss provisions, and limitation on excess business losses of noncorporate taxpayers. ( 5 ) Capitalized interest expenses. ( 6 ) Reductions under section 246A. ( 7 ) Section 381. ( 8 ) Section 382. ( c ) Examples. ( d ) Applicability date. *§ 1.163(j)-4 General rules applicable to C corporations (including REITs, RICs, and members of consolidated groups) and tax-exempt corporations.* ( a ) Scope. ( b ) Characterization of items of income, gain, deduction, or loss. ( 1 ) Interest expense and interest income. ( 2 ) Adjusted taxable income. ( 3 ) Investment interest, investment income, investment expenses, and certain other tax items of a partnership with a C corporation partner. ( i ) Characterization as expense or income properly allocable to a trade or business. ( ii ) Effect of characterization on partnership. ( iii ) Separately stated interest expense and interest income of a partnership not treated as excess business interest expense or excess taxable income of a C corporation partner. ( iv ) Treatment of deemed inclusions of a domestic partnership that are not allocable to any trade or business. ( 4 ) Application to RICs and REITs. ( i ) In general. ( ii ) Tentative taxable income of RICs and REITs. ( iii ) Other adjustments to adjusted taxable income for RICs and REITs. ( 5 ) Application to tax-exempt corporations. ( 6 ) Adjusted taxable income of cooperatives. ( 7 ) Examples. ( c ) Effect on earnings and profits. ( 1 ) In general. ( 2 ) Special rule for RICs and REITs. ( 3 ) Special rule for partners that are C corporations. ( 4 ) Examples. ( d ) Special rules for consolidated groups. ( 1 ) Scope. ( 2 ) Calculation of the section 163(j) limitation for members of a consolidated group. ( i ) In general. ( ii ) Interest. ( iii ) Calculation of business interest expense and business interest income for a consolidated group. ( iv ) Calculation of adjusted taxable income. ( v ) Treatment of intercompany obligations. ( A ) In general. ( B ) Repurchase premium. ( 3 ) Investment adjustments. ( 4 ) Examples. ( e ) Ownership of partnership interests by members of a consolidated group. ( 1 ) [Reserved] ( 2 ) Change in status of a member. ( 3 ) Basis adjustments under § 1.1502-32. ( 4 ) Excess business interest expense and § 1.1502-36. ( f ) Cross-references. ( g ) Applicability date. ( 1 ) In general. ( 2 ) [Reserved] *§ 1.163(j)-5 General rules governing disallowed business interest expense carryforwards for C corporations.* ( a ) Scope and definitions. ( 1 ) Scope. ( 2 ) Definitions. ( i ) Allocable share of the consolidated group's remaining section 163(j) limitation. ( ii ) Consolidated group's remaining section 163(j) limitation. ( iii ) Remaining current-year interest ratio. ( b ) Treatment of disallowed business interest expense carryforwards. ( 1 ) In general. ( 2 ) Deduction of business interest expense. ( 3 ) Consolidated groups. ( i ) In general. ( ii ) Deduction of business interest expense. ( A ) General rule. ( B ) Section 163(j) limitation equals or exceeds the current-year business interest expense and disallowed business interest expense carryforwards from prior taxable years. ( C ) Current-year business interest expense and disallowed business interest expense carryforwards exceed section 163(j) limitation. ( iii ) Departure from group. ( iv ) Example: Deduction of interest expense. ( c ) Disallowed business interest expense carryforwards in transactions to which section 381(a) applies. ( d ) Limitations on disallowed business interest expense carryforwards from separate return limitation years. ( 1 ) General rule. ( A ) Cumulative section 163(j) SRLY limitation. ( B ) Subgrouping. ( 2 ) Deduction of disallowed business interest expense carryforwards arising in a SRLY. ( 3 ) Examples. ( e ) Application of section 382. ( 1 ) Pre-change loss. ( 2 ) Loss corporation. ( 3 ) Ordering rules for utilization of pre-change losses and for absorption of the section 382 limitation. ( 4 ) Disallowed business interest expense from the pre-change period in the year of a testing date. ( 5 ) Recognized built-in loss. ( f ) Overlap of SRLY limitation with section 382. ( g ) Additional limitations. ( h ) Applicability date. § 1.163(j)-6 Application of the business interest deduction limitation to partnerships and subchapter S Corporations. ( a ) Overview. ( b ) Definitions. ( 1 ) Section 163(j) items. ( 2 ) Partner basis items. ( 3 ) Remedial items. ( 4 ) Excess business interest income. ( 5 ) Deductible business interest expense. ( 6 ) Section 163(j) excess items. ( 7 ) Non-excepted assets. ( 8 ) Excepted assets. ( c ) Business interest income and business interest expense of the partnership. ( 1 ) Modification of business interest income for partnerships. ( 2 ) Modification of business interest expense for partnerships. ( 3 ) Transition rule. ( 4 ) Character of business interest expense. ( d ) Adjusted taxable income of a partnership. ( 1 ) Tentative taxable income of a partnership. ( 2 ) Section 734(b), partner basis items, and remedial items. ( 3 ) Section 743(b) adjustments and publicly traded partnerships. ( 4 ) Modification of adjusted taxable income for partnerships. ( 5 ) Election to use 2019 adjusted taxable income for taxable years beginning in 2020. ( e ) Adjusted taxable income and business interest income of partners. ( 1 ) Modification of adjusted taxable income for partners. ( 2 ) Partner basis items and remedial items. ( 3 ) Disposition of partnership interests. ( 4 ) Double counting of business interest income and floor plan financing interest expense prohibited. ( 5 ) Partner basis items, remedial items, and publicly traded partnerships. ( 6 ) [Reserved] ( f ) Allocation and determination of section 163(j) excess items made in the same manner as nonseparately stated taxable income or loss of the partnership. ( 1 ) Overview. ( i ) In general. ( ii ) Relevance solely for purposes of section 163(j). ( iii ) Exception applicable to publicly traded partnerships. ( 2 ) Steps for allocating deductible business interest expense and section 163(j) excess items. ( i ) Partnership-level calculation required by section 163(j)(4)(A). ( ii ) Determination of each partner's relevant section 163(j) items. ( iii ) Partner-level comparison of business interest income and business interest expense. ( iv ) Matching partnership and aggregate partner excess business interest income. ( v ) Remaining business interest expense determination. ( vi ) Determination of final allocable ATI. ( A ) Positive allocable ATI. ( B ) Negative allocable ATI. ( C ) Final allocable ATI. ( vii ) Partner-level comparison of 30 percent of adjusted taxable income and remaining business interest expense. ( viii ) Partner priority right to ATI capacity excess determination. ( ix ) Matching partnership and aggregate partner excess taxable income. ( x ) Matching partnership and aggregate partner excess business interest expense. ( xi ) Final section 163(j) excess item and deductible business interest expense allocation. ( g ) Carryforwards. ( 1 ) In general. ( 2 ) Treatment of excess business interest expense allocated to partners. ( 3 ) Excess taxable income and excess business interest income ordering rule. ( 4 ) Special rule for taxable years beginning in 2019 and 2020. ( h ) Basis adjustments. ( 1 ) Section 704(d) ordering. ( 2 ) Excess business interest expense basis adjustments. ( 3 ) Partner basis adjustment upon disposition of partnership interest. ( 4 ) - ( 5 ) [Reserved] ( i ) - ( j ) [Reserved] ( k ) Investment items and certain other items. ( l ) S corporations. ( 1 ) In general. ( i ) Corporate level limitation. ( ii ) Short taxable periods. ( 2 ) Character of deductible business interest expense. ( 3 ) Adjusted taxable income of an S corporation. ( 4 ) Adjusted taxable income and business interest income of S corporation shareholders. ( i ) Adjusted taxable income of S corporation shareholders. ( ii ) Disposition of S corporation stock. ( iii ) Double counting of business interest income and floor plan financing interest expense prohibited. ( iv ) [Reserved] ( 5 ) Carryforwards. ( 6 ) Basis adjustments and disallowed business interest expense carryforwards. ( 7 ) Accumulated adjustment accounts. ( 8 ) Termination of qualified subchapter S subsidiary election. ( 9 ) Investment items. ( 10 ) Application of section 382. ( m ) Partnerships and S corporations not subject to section 163(j). ( 1 ) Exempt partnerships and S corporations. ( 2 ) Partnerships and S corporations engaged in excepted trades or businesses. ( 3 ) Treatment of excess business interest expense from partnerships that are exempt entities in a succeeding taxable year. ( 4 ) S corporations with disallowed business interest expense carryforwards prior to becoming exempt entities. ( n ) Treatment of self-charged lending transactions between partnerships and partners. ( o ) Examples. ( p ) Applicability dates. ( 1 ) In general. ( 2 ) Paragraphs (c)(1) and (2), (d)(3) through (5), (e)(5), (f)(1)(iii), (g)(4), (n), and (o)(24) through (29), and (34) through (36). § 1.163(j)-7 Application of the section 163(j) limitation to foreign corporations and United States shareholders. ( a ) Overview. ( b ) General rule regarding the application of section 163(j) to relevant foreign corporations. ( c ) Application of section 163(j) to CFC group members of a CFC group. ( 1 ) Scope. ( 2 ) Calculation of section 163(j) limitation for a CFC group for a specified period. ( i ) In general. ( ii ) Certain transactions between CFC group members disregarded. ( iii ) [Reserved] ( iv ) [Reserved] ( 3 ) Deduction of business interest expense. ( i ) CFC group business interest expense. ( A ) In general. ( B ) Modifications to relevant terms. ( ii ) Carryforwards treated as attributable to the same taxable year. ( iii ) Multiple specified taxable years of a CFC group member with respect to a specified period. ( iv ) Limitation on pre-group disallowed business interest expense carryforward. ( A ) General rule. ( 1 ) CFC group member pre-group disallowed business interest expense carryforward. ( 2 ) Subgrouping. ( 3 ) Transition rule. ( B ) Deduction of pre-group disallowed business interest expense carryforwards. ( 4 ) Currency translation. ( 5 ) Special rule for specified periods beginning in 2019 or 2020. ( i ) 50 percent ATI limitation applies to a specified period of a CFC group. ( ii ) Election to use 2019 ATI applies to a specified period of a CFC group. ( A ) In general. ( B ) Specified taxable years that do not begin in 2020. ( d ) Determination of a specified group and specified group members. ( 1 ) Scope. ( 2 ) Rules for determining a specified group. ( i ) Definition of a specified group. ( ii ) Indirect ownership. ( iii ) Specified group parent. ( iv ) Qualified U.S. person. ( v ) Stock. ( vi ) Options treated as exercised. ( vii ) When a specified group ceases to exist. ( 3 ) Rules for determining a specified group member. ( e ) Rules and procedures for treating a specified group as a CFC group. ( 1 ) Scope. ( 2 ) CFC group and CFC group member. ( i ) CFC group. ( ii ) CFC group member. ( 3 ) Duration of a CFC group. ( 4 ) Joining or leaving a CFC group. ( 5 ) Manner of making or revoking a CFC group election. ( i ) In general. ( ii ) Revocation by election. ( iii ) Timing. ( iv ) Election statement. ( v ) Effect of prior CFC group election. ( 6 ) Annual information reporting. ( f ) Treatment of a CFC group member that has ECI. ( 1 ) In general. ( 2 ) [Reserved] ( g ) Rules concerning the computation of adjusted taxable income of a relevant foreign corporation. ( 1 ) Tentative taxable income. ( 2 ) Treatment of certain dividends. ( 3 ) Treatment of certain foreign income taxes. ( 4 ) Anti-abuse rule. ( i ) In general. ( ii ) ATI adjustment amount. ( A ) In general. ( B ) Special rule for taxable years or specified periods beginning in 2019 or 2020. ( iii ) Applicable partnership. ( h ) Election to apply safe-harbor. ( 1 ) In general. ( 2 ) Eligibility for safe-harbor election. ( i ) Stand-alone applicable CFC. ( ii ) CFC group. ( iii ) Currency translation. ( 3 ) Eligible amount. ( i ) Stand-alone applicable CFC. ( ii ) CFC group. ( iii ) Additional rules for determining an eligible amount. ( 4 ) Qualified tentative taxable income. ( 5 ) Manner of making a safe-harbor election. ( i ) In general. ( ii ) Election statement. ( 6 ) Special rule for taxable years or specified periods beginning in 2019 or 2020. ( i ) - ( j ) [Reserved] ( k ) Definitions. ( 1 ) Applicable partnership. ( 2 ) Applicable specified taxable year. ( 3 ) ATI adjustment amount. ( 4 ) [Reserved] ( 5 ) [Reserved] ( 6 ) CFC group. ( 7 ) CFC group election. ( 8 ) CFC group member. ( 9 ) [Reserved] ( 10 ) Cumulative section 163(j) pre-group carryforward limitation. ( 11 ) Current group. ( 12 ) Designated U.S. person. ( 13 ) ECI deemed corporation. ( 14 ) Effectively connected income. ( 15 ) Eligible amount. ( 16 ) Former group. ( 17 ) Loss member. ( 18 ) Payment amount. ( 19 ) Pre-group disallowed business interest expense carryforward. ( 20 ) Qualified tentative taxable income. ( 21 ) Qualified U.S. person. ( 22 ) Relevant period. ( 23 ) Safe-harbor election. ( 24 ) Specified borrower. ( 25 ) Specified group. ( 26 ) Specified group member. ( 27 ) Specified group parent. ( 28 ) Specified lender. ( 29 ) Specified period. ( i ) In general. ( ii ) Short specified period. ( 30 ) Specified taxable year. ( 31 ) Stand-alone applicable CFC. ( 32 ) Stock. ( l ) Examples. ( m ) Applicability dates. ( 1 ) General applicability date. ( 2 ) Exception. ( 3 ) Early application. ( i ) Rules for paragraphs (b) and (g)(1) and (2) of this section. ( ii ) Rules for certain other paragraphs in this section. ( 4 ) Additional rules that must be applied consistently. ( 5 ) Election for prior taxable years. *§ 1.163(j)-8 [Reserved]* § *1.163(j)-9 Elections for excepted trades or businesses; safe harbor for certain REITs.* ( a ) Overview. ( b ) Availability of election. ( 1 ) In general. ( 2 ) Special rules. ( i ) Exempt small businesses. ( ii ) Section 162 trade or business not required for electing real property trade or business. ( c ) Scope and effect of election. ( 1 ) In general. ( 2 ) Irrevocability. ( 3 ) Depreciation. ( d ) Time and manner of making election. ( 1 ) In general. ( 2 ) Election statement contents. ( 3 ) Consolidated group's trade or business. ( 4 ) Partnership's trade or business. ( e ) Termination of election. ( 1 ) In general. ( 2 ) Taxable asset transfer defined. ( 3 ) Related party defined. ( 4 ) Anti-abuse rule. ( f ) Additional guidance. ( g ) Examples. ( h ) Safe harbor for REITs. ( 1 ) In general. ( 2 ) REITs that do not significantly invest in real property financing assets. ( 3 ) REITs that significantly invest in real property financing assets. ( 4 ) REIT real property assets, interests in partnerships, and shares in other REITs. ( i ) Real property assets. ( ii ) Partnership interests. ( iii ) Shares in other REITs. ( A ) In general. ( B ) Information necessary. ( iv ) Tiered entities. ( 5 ) Value of shares in other REITs. ( i ) In general. ( ii ) Information necessary. ( iii ) Tiered REITs. ( 6 ) Real property financing assets. ( 7 ) Application of safe harbor for partnerships controlled by REITS. ( 8 ) REITs or partnerships controlled by REITs that do not apply the safe harbor. ( i ) [Reserved] ( j ) Special anti-abuse rule for certain real property trades or businesses. ( 1 ) In general. ( 2 ) Exceptions. ( i ) De minimis exception. ( ii ) Look-through exception. ( iii ) Inapplicability of exceptions to consolidated groups. ( iv ) Exception for certain REITs. ( 3 ) Allocations. ( 4 ) Examples. ( k ) Applicability date. § 1.163(j)-10 Allocation of interest expense, interest income, and other items of expense and gross income to an excepted trade or business. ( a ) Overview. ( 1 ) In general. ( i ) Purposes. ( ii ) Application of section. ( 2 ) Coordination with other rules. ( i ) In general. ( ii ) Treatment of investment interest, investment income, investment expenses, and certain other tax items of a partnership with a C corporation or tax-exempt corporation as a partner. ( 3 ) Application of allocation rules to foreign corporations and foreign partnerships. ( 4 ) Application of allocation rules to members of a consolidated group. ( i ) In general. ( ii ) Application of excepted business percentage to members of a consolidated group. ( iii ) Basis in assets transferred in an intercompany transaction. ( 5 ) Tax-exempt organizations. ( 6 ) Application of allocation rules to disallowed disqualified interest. ( 7 ) Examples. ( b ) Allocation of tax items other than interest expense and interest income. ( 1 ) In general. ( 2 ) Gross income other than dividends and interest income. ( 3 ) Dividends. ( i ) Look-through rule. ( ii ) Inapplicability of the look-through rule. ( 4 ) Gain or loss from the disposition of non-consolidated C corporation stock, partnership interests, or S corporation stock. ( i ) Non-consolidated C corporations. ( ii ) Partnerships and S corporations. ( 5 ) Expenses, losses, and other deductions. ( i ) Expenses, losses, and other deductions that are definitely related to a trade or business. ( ii ) Other deductions. ( 6 ) Treatment of investment items and certain other items of a partnership with a C corporation partner. ( 7 ) Examples: Allocation of income and expense. ( c ) Allocating interest expense and interest income that is properly allocable to a trade or business. ( 1 ) General rule. ( i ) In general. ( ii ) De minimis exception. ( 2 ) Example. ( 3 ) Asset used in more than one trade or business. ( i ) General rule. ( ii ) Permissible methodologies for allocating asset basis between or among two or more trades or businesses. ( iii ) Special rules. ( A ) Consistent allocation methodologies. ( 1 ) In general. ( 2 ) Consent to change allocation methodology. ( B ) De minimis exception. ( C ) Allocations of excepted regulated utility trades or businesses. ( 1 ) In general. ( 2 ) Permissible method for allocating asset basis for utility trades or businesses. ( 3 ) De minimis rule for excepted utility trades or businesses. ( 4 ) Example. ( D ) Special allocation rule for real property trades or business subject to special anti-abuse rule. ( 1 ) In general. ( 2 ) Allocation methodology for real property. ( 3 ) Example. ( 4 ) Disallowed business interest expense carryforwards; floor plan financing interest expense. ( 5 ) Additional rules relating to basis. ( i ) Calculation of adjusted basis. ( A ) Non-depreciable property other than land. ( B ) Depreciable property other than inherently permanent structures. ( C ) Special rule for land and inherently permanent structures. ( D ) Depreciable or amortizable intangible property and depreciable income forecast method property. ( E ) Assets not yet used in a trade or business. ( F ) Trusts established to fund specific liabilities. ( G ) Inherently permanent structure. ( ii ) Partnership interests; stock in non-consolidated C corporations. ( A ) Partnership interests. ( 1 ) Calculation of asset basis. ( 2 ) Allocation of asset basis. ( i ) In general. ( ii ) De minimis rule. ( iii ) Partnership assets not properly allocable to a trade or business. ( iv ) Inapplicability of partnership look-through rule. ( B ) Stock in domestic non-consolidated corporations. ( 1 ) In general. ( 2 ) Domestic non-consolidated C corporations. ( i ) Allocation of asset basis. ( ii ) De minimis rule. ( iii ) Inapplicability of corporate look-through rule. ( iv ) Use of inside basis for purposes of C corporation look-through rule. ( 3 ) S corporations. ( i ) Calculation of asset basis. ( ii ) Allocation of asset basis. ( iii ) De minimis rule. ( iv ) Inapplicability of S corporation look-through rule. ( C ) Stock in relevant foreign corporations. ( 1 ) In general. ( 2 ) Special rule for CFC utilities. ( D ) Limitations on application of look-through rules. ( 1 ) Inapplicability of look-through rule to partnerships or non-consolidated C corporations to which the small business exemption applies. ( 2 ) Limitation on application of look-through rule to C corporations. ( D ) Inapplicability of look-through rule to partnerships or non-consolidated C corporations to which the small business exemption applies. ( E ) Tiered entities. ( iii ) Cash and cash equivalents and customer receivables. ( iv ) Deemed asset sale. ( v ) Other adjustments. ( 6 ) Determination dates; determination periods; reporting requirements. ( i ) Determination dates and determination periods. ( A ) Quarterly determination periods. ( B ) Annual determination periods. ( ii ) Application of look-through rules. ( iii ) Reporting requirements. ( A ) Books and records. ( B ) Information statement. ( iv ) Failure to file statement. ( 7 ) Ownership threshold for look-through rules. ( i ) Corporations. ( A ) Asset basis. ( B ) Dividends. ( ii ) Partnerships. ( iii ) Inapplicability of look-through rule. ( 8 ) Anti-abuse rule. ( d ) Direct allocations. ( 1 ) In general. ( 2 ) Qualified nonrecourse indebtedness. ( 3 ) Assets used in more than one trade or business. ( 4 ) Adjustments to basis of assets to account for direct allocations. ( 5 ) Example: Direct allocation of interest expense. ( e ) Examples. ( f ) Applicability dates. ( 1 ) In general. ( 2 ) Paragraph (c)(5)(ii)(D)(*2*). *§ 1.163(j)-11 Transition rules.* ( a ) Overview. ( b ) Application of section 163(j) limitation if a corporation joins a consolidated group during a taxable year of the group beginning before January 1, 2018. ( 1 ) In general. ( 2 ) Example ( c ) Treatment of disallowed disqualified interest. ( 1 ) In general. ( 2 ) Earnings and profits. ( 3 ) Disallowed disqualified interest of members of an affiliated group. ( i ) Scope. ( ii ) Allocation of disallowed disqualified interest to members of the affiliated group. ( A ) In general. ( B ) Definitions. ( 1 ) Allocable share of the affiliated group's disallowed disqualified interest. ( 2 ) Disallowed disqualified interest ratio. ( 3 ) Exempt related person interest expense. ( iii ) Treatment of carryforwards. ( 4 ) Application of section 382. ( i ) Ownership change occurring before November 13, 2020. ( A ) Pre-change loss. ( B ) Loss corporation. ( ii ) Ownership change occurring on or after November 13, 2020. ( A ) Pre-change loss. ( B ) Loss corporation. ( 5 ) Treatment of excess limitation from taxable years beginning before January 1, 2018. ( 6 ) Example: Members of an affiliated group. ( d ) Applicability date. [T.D. 9905, 85 FR 56760, Sept, 14, 2020, as amended by T.D. 9943, 86 FR 5522, Jan. 19, 2021]