26 CFR 1.58-7 – Tax preferences attributable to foreign sources; preferences other than capital gains and stock options
(a) In general. Section 58(g)(1) provides that except in the case of the stock options item of tax preference (section 57(a)(6) and § 1.57-1(f)) and the capital gains item of tax preference (section 57(a)(9) and § 1.57-1(i)), items of tax preference which are attributable to sources within any foreign country or possession of the United States shall, for purposes of section 56, be taken into account only to the extent that such items reduce the tax imposed by chapter 1 (other than the minimum tax under section 56) on income derived from sources within the United States. Items of tax preference from sources within any foreign country or possession of the United States reduce the chapter 1 tax on income from sources within the United States to the extent the deduction relating to such preferences, in combination with other foreign deductions, exceed the income from such sources and, in effect, offset income from sources within the United States. Items of tax preference, for this purpose, are determined after application of § 1.57-4 (relating to limitation on amounts treated as items of tax preference). In the case of a taxpayer who deducted foreign taxes under section 164 for a taxable year, the provisions of this section shall be applied (without regard to section 275(a)(4)) as if he had elected the overall foreign tax credit limitation under section 904(a) (2) for such year.
(b) Preferences attributable to foreign sources—(1) Preferences other than excess investment interest. Except in the case of excess investment interest (see subparagraph (2) of this paragraph), an item of tax preference to which this section applies is attributable to sources within a foreign country or possession of the United States to the extent such item is attributable to a deduction properly allocable or apportionable to an item or class of gross income from sources within a foreign country or possession of the United States under the principles of section 862(b), or section 863, and the regulations thereunder. Where, in the case of income partly from sources within the United States and partly from sources within a foreign country or possession of the United States, taxable income is computed before apportionment to domestic and foreign sources, and is then apportioned by processes or formulas of general apportionment (pursuant to section 863(b) and the regulations thereunder), deductions attributable to such taxable income are considered to be proportionately from sources within the United States and within the foreign country or possession of the United States on the same basis as taxable income.
(2) Excess investment interest—(i) Per-country limitation—(a) In the case of a taxpayer on the per-country foreign tax credit limitation under section 904(a) for the taxable year, excess investment interest (as defined in section 57(b)(1)), and the resulting item of tax preference, is attributable to sources within a foreign country or a possession of the United States to the extent that investment interest expense attributable to income from sources within such foreign country or possession of the United States exceeds the net investment income from sources within such foreign country or such possession. For this purpose, net investment income from within a foreign country or possession of the United States is the excess (if any) of the investment income from sources within such country or possession over the investment expenses attributable to income from sources within such country or such possession. For the definition of investment interest expense see section 57(b)(2)(D); for the definition of investment income see section 57(b)(2)(B); for the definition of investment expense see section 57(b)(2)(C).
(b) If the taxpayer’s excess investment interest computed on a worldwide basis is less than the taxpayer’s total separately determined excess investment interest (as defined in this subdivision (b)), the amount of the taxpayer’s excess investment interest from each foreign country or possession is the amount which bears the same relationship to the taxpayer’s excess investment interest from each such country or possession, determined without regard to this subdivision (b), as the taxpayer’s worldwide excess investment interest bears to the taxpayer’s total separately determined excess investment interest. For purposes of this subdivision (b), the taxpayer’s total separately determined excess investment interest is the sum of the total excess investment interest determined without regard to this subdivision (b) plus the taxpayer’s excess investment interest from sources within the United States determined in a manner consistent with (a) of this subdivision (i).
(ii) Overall limitation. In the case of a taxpayer who has elected the overall foreign tax credit limitation under section 904(a)(2) for the taxable year, excess investment interest (as defined in section 57(b)(1)), and the resulting item of tax preference, is attributable to sources within any foreign country or possession of the United States to the extent that investment interest expense attributable to income from such sources exceeds the sum of (a) the net investment income from such sources plus (b) the excess, if any, of net investment income from sources within the United States over investment interest expense attributable to sources within the United States. For this purpose, net investment income from sources within any foreign country or possession of the United States is the excess (if any) of the investment income from all such sources over the investment expenses attributable to income from such sources. For the definition of investment interest expense see section 57(b)(2)(D) for the definition of investment income see section 57(b)(2)(B); for the definition of investment expense see section 57(b)(2)(C).
(iii) Allocation of expenses. The determination of the investment interest expense and investment expenses attributable to a foreign country or possession of the United States is made in a manner consistent with subparagraph (1) of this paragraph.
(iv) Attribution of certain interest deductions to foreign sources. Where net investment income from sources within any foreign country or possession has the effect of offsetting investment interest expense attributable to income from sources within the United States, the deductions for the investment interest expense so offset are, for purposes of § 1.58-7(c) (relating to reduction in taxes on United States source income), treated as deductions attributable to income from sources within the foreign country or possession from which such net investment income is derived. Such an offset will occur where there is an excess of investment interest expense attributable to income from sources within the United States over net investment income from such sources and (a) in the case of a taxpayer on the per-country foreign tax credit limitation, an excess of net investment income from sources within a foreign country or possession of the United States over investment interest expense from within such foreign country or possession, or (b) in the case of a taxpayer who has elected the overall foreign tax credit limitation, there is an excess of net investment income from sources within foreign countries or possessions of the United States over investment interest expense attributable to income from within such sources.
(v) Separate limitation on interest income. Where a taxpayer has income described in section 904(f)(2) (relating to interest income subject to the separate foreign tax credit limitation) or expenses attributable to such income, the determination of the excess investment interest resulting therefrom must be determined separately with respect to such income and the expenses properly allocable or apportionable thereto in the same manner as such determination is made in the case of a taxpayer on the per-country foreign tax credit limitation for the taxable year (see subdivision (i) of this subparagraph).
(vi) Examples. The principles of this subparagraph may be illustrated by the following examples in each of which the taxpayer is an individual and a citizen of the United States:
*Excess of net investment income over investment interest expense. United States France Germany Total Investment income from sources within $150,000 $120,000 $180,000 $450,000 Investment expenses relating to income from sources within (100,000) (90,000) (120,000) (310,000) Net investment income 50,000 30,000 60,000 140,000 Investment interest expense relating to income from sources within (110,000) (70,000) (50,000) (230,000) (Excess) of investment interest expense over net investment income (60,000) (40,000) *10,000 (90,000) Investment interest: French ($70,000) German (50,000) ($120,000) Net investment income: Investment income: French 120,000 German 180,000 $300,000 Less: Investment expenses: French (90,000) German (120,000) (210,000) 90,000 Excess of U.S. net income over investment interest expenses: Total foreign excess investment interest (30,000) United States France Germany Total Investment income from sources within $180,000 $120,000 $150,000 $450,000 Investment expenses relating to income from sources within (120,000) (90,000) (100,000) (310,000) Net investment income 60,000 30,000 50,000 140,000 Investment interest expense relating to income from sources within (50,000) (70,000) (110,000) (230,000) (Excess) of investment interest expense over net investment income 10,000 (40,000) (60,000) (90,000) Foreign investment interest: French ($70,000) German (110,000) ($180,000) Foreign net investment income: French 120,000 German 150,000 $270,000 Less: Investment expenses: French (90,000) German (100,000) (190,000) 80,000 Excess of U.S. net investment income over U.S. investment interest expense 10,000 Excess investment interest attributable to foreign sources (90,000)
(a) If the taxpayer has elected the overall foreign tax credit limitation, his excess investment interest from sources within any foreign countries or possessions of the United States determined under subdivision (ii) of this subparagraph is the same as in (a) of example (1) of this subdivision (vi). He then treats such amount as separately determined excess investment interest attributable to a single foreign country as determined under subdivision (i) of this subparagraph and proceeds as in (b) of example (1) of this subdivision (vi) treating items of income and deduction subject to section 904(f) and from each separate foreign country or possession separately in making the additional determinations under subdivisions (i) and (iv) of this subparagraph.
(b) If the taxpayer has not elected the overall foreign tax credit limitation, his excess investment interest from sources within any foreign country or possession of the United States would be determined in the same manner as in (b) of example (1) treating items of income and deduction which are subject to section 904(f) and from each separate foreign country or possession separately in making the determinations under subdivisions (i) and (iv) of this subparagraph.
(c) Reduction in taxes on United States source income—(1) Overall limitation—(i) In general. If a taxpayer is on the overall foreign tax credit limitation under section 904(a)(2), the items of tax preference determined to be attributable to foreign sources under paragraph (b) of this section reduce the tax imposed by chapter 1 (other than the minimum tax imposed under section 56) on income from sources within the United States for the taxable year to the extent of the smallest of the following three amounts:
(a) Items of tax preference (other than stock options and capital gains) attributable to sources within a foreign country or possession of the United States,
(b) The excess (if any) of the total deductions properly allocable or apportionable to items or classes of gross income from sources within foreign countries and possessions of the United States over the gross income from such sources, or
(c) Taxable income from sources within the United States.
(ii) Net operating loss. Where there is an overall net operating loss for the taxable year, to the extent that the lesser of the amounts determined under (a) or (b) of subdivision (i) of this subparagraph exceeds the taxpayer’s taxable income from sources within the United States (and, therefore do not offset taxable income from sources within the United States for the taxable year) the amount of such excess is treated as “suspense preferences.” Suspense preferences are converted to actual items of tax preference, arising in the loss year and subject to the provisions of section 56, as the net operating loss is used in other taxable years, in the form of a net operating loss deduction under section 172, to offset taxable income from sources within the United States. Suspense preferences which, in other taxable years, reduce taxable income from sources within any foreign country or possession of the United States lose their character as suspense preferences and, thus, are never converted into actual items of tax preference. The amount of the suspense preferences which are converted into actual items of tax preference is equal to that portion of the net operating loss attributable to the suspense preferences which offset taxable income from sources within the United States in taxable years other than the loss year. The determination of the component parts of the net operating loss and the determination of the amount by which the portion of the net operating loss attributable to suspense preferences offsets taxable income from sources within the United States is made on a year-by-year basis in the same order as the net operating loss is used in accordance with section 172(b). Such determination is made by applying deductions attributable to U.S. source income first against such income and deductions attributable to foreign source income first against such foreign source income and in accordance with the following principles:
(a) Deductions attributable to items or classes of gross income from sources within the United States offset taxable income from sources within the United States before any remaining portion of the net operating loss;
(b) Deductions attributable to items or classes of gross income from sources within foreign countries or possessions of the United States offset taxable income from such sources before any remaining portion of the net operating loss;
(c) Deductions described in (b) of the subdivision (ii) which are not suspense preferences (referred to in this subparagraph as “other foreign deductions”) offset taxable income from sources within foreign countries and possessions of the United States before suspense preferences; and
(d) Suspense preferences offset taxable income from sources within the United States before other foreign deductions.
(iii) Examples. The principles of this subparagraph may be illustrated by the following examples. In each example the taxpayer is an individual citizen of the United States and has elected the overall foreign tax credit limitation. Personal deductions and exemptions are disregarded for purposes of these examples.
United States taxable income: Gross income $750,000 Deductions (250,000) $500,000 Foreign source loss: Gross income 200,000 Deductions: Preference items (excess of percentage depletion over basis) $550,000 Other 50,000 (600,000) (400,000) Overall taxable income 100,000
(a) If, in 1971, the taxpayer’s total items of income and deduction result in $350,000 of taxable income all of which is from sources within the United States, the entire $300,000 net operating loss, all of which is attributable to suspense preferences, is used to offset U.S. taxable income. Accordingly, the full $300,000 of suspense preferences are converted into actual items of tax preference arising in 1974 and are subject to tax under section 56.
(b) If the $350,000 in 1971 is modified taxable income resulting from the denial of a section 1202 capital gains deduction of $175,000 by reason of section 172(b)(2), the $300,000, otherwise treated as actual items of tax preference, is reduced by $125,000, i.e., the extent to which the suspense preferences offset U.S. taxable income attributable to the increase in taxable income resulting from the denial of the section 1202 deduction.
[In thousands of dollars] *Suspense preferences converted to actual items of tax preference. 1970 Net Operating Loss [In thousands of dollars] *Suspense preferences converted into actual items of tax preference. 1970 Net Operating Loss [In thousands of dollars] 1 Represents the 1970 minimum tax exemption. 2 Imposition of 1970 minimum tax (10 pct × $50,000 = $5,000). 1970 Net Operating Loss [In thousands of dollars] 1 Suspense preferences converted into actual items of tax preference. 1970 Net Operating Loss [In thousands of dollars] 1 Imposition of 1970 minimum tax (10 pct × $95,000 = $9,500).United States loss: Gross income $75,000 Deductions (225,000) ($150,000) Foreign loss: Gross income 400,000 Deductions: Preference items (excess of accelerated depreciation on sec. 1250 property over straight-line amount) $200,000 Other 550,000 (750,000) (350,000) Overall net operating loss (500,000) Year—Explanation Taxable income U.S. deductions Foreign deductions U.S. source Foreign source Suspense preferences Other 1971 End of year balance before section 58(g) computations 100 80 150 200 150 1. U.S. deductions against U.S. income (100) (100) 2. Other foreign deductions against foreign income (80) (80) 1972 End of year balance before section 58(g) computations 200 80 50 200 70 1. U.S. deductions against U.S. income (50) (50) 2. Other foreign deductions against foreign income (70) (70) 3. Suspense preferences against foreign income (10) (10) 4. Suspense preferences against U.S. income *(150) *(150) 1973 End of year balance before section 58(g) computations 300 80 40 1. U.S. deductions against U.S. income Not applicable 2. Other foreign deductions against foreign income Not applicable 3. Suspense preference against foreign income (40) (40) 4. Suspense preferences against U.S. income Not applicable Balances 300 40 Foreign loss: Gross income $400,000 Deductions: Preferences (excess of accelerated depreciation on section 1250 property over straight-line) $200,000 Net operating loss 350,000 1971 taxable income: United States $160,000 Foreign 70,000 Total 230,000 1972 taxable income: United States 25,000 Foreign 105,000 Total 130,000 U.S. taxable income Foreign taxable income U.S. deductions Suspense preferences Other foreign deductions $160 $70 $200 $150 1. U.S. deductions against U.S. income Not applicable 2. Other foreign deductions against foreign income 70 (70) 3. Suspense preference against foreign income Not applicable 4. Suspense preference against U.S. income *(160) (160) Balance to 1972 40 80 1971 taxable income Nonpreference portion Preference portion Suspense portion $230 $150 $200 1. 1971 conversion of suspense preferences pursuant to sec. 58(g) 1 30 $130 (160) Adjusted NOL 180 130 40 2. Nonpreference portion against taxable income (180) (180) 3. Preference portion against taxable income 2 (50) (50) Balance to 1972 80 40 U.S. taxable income Foreign taxable income U.S. deductions Suspense preferences Other foreign deductions $25 $105 $40 $80 1. U.S. deduction against U.S. income Not applicable 2. Other foreign deductions against foreign income (80) (80) 3. Suspense preferences against foreign income (25) (25) 4. Suspense preference against U.S. income 1 (15) (15) Balance 10 1972 taxable income Nonpreference portion Preference portion Suspense portion $130 $80 $40 1. 1972 conversion of suspense preferences pursuant to sec. 58(g) $25 15 (40) Adjusted NOL 25 95 2. Nonpreference portion against taxable income (25) (25) 3. Preference portion against taxable income 1 (95) (95) Balance 10
(2) Per-country limitation—(i) In general. If a taxpayer is on the per-country foreign tax credit limitation for the taxable year, the amount by which the items of tax preference to which this section applies reduce the tax imposed by chapter 1 (other than the minimum tax under section 56) on income from sources within the United States is determined separately with respect to each foreign country or possession of the United States. Such determination is made in a manner consistent with subparagraph (1) of this paragraph as modified in subdivision (ii) of this subparagraph. In applying subparagraph (1)(i) of this paragraph to a taxpayer on the per-country limitation, if the total potential preference amounts (as defined in this subdivision (i)) exceed the taxpayer’s taxable income from sources within the United States, then, for purposes of subparagraph (1)(i)(c) of this paragraph (relating to the U.S. taxable income limitation on the amount treated as a reduction of U.S. taxable income), the taxable income from sources within the United States which is reduced by potential preference amounts with respect to each foreign country or possession is an amount which bears the same relationship to such income as the potential preference amount with respect to such foreign country or possession bears to the total of the potential preference amounts with respect to all foreign countries and possessions. For purposes of this subparagraph, the potential preference amount with respect to a foreign country or possession is the lesser of the amount of foreign source preference (described in subparagraph (1)(i)(a) of this paragraph) attributable to such country or possession or the amount of foreign source loss (described in subparagraph (1)(i)(b) of this paragraph) attributable to such country or possession.
(ii) Net operating loss. Where there is an overall net operating loss for the taxable year and the total of the potential preference amounts with respect to all foreign countries and possessions exceeds the taxpayer’s taxable income from sources within the United States, the amount of such excess is treated as “suspense preferences”. The suspense preferences are converted into actual items of tax preference, arising in the loss year and subject to the provisions of section 56, as the net operating loss is used in other taxable years, in the form of a net operating loss deduction under section 172, to offset taxable income from sources within the United States. Suspense preferences attributable to a foreign country or possession which, in other taxable years, reduce taxable income from sources within such country or possession or offset taxable income from sources within any other foreign country or possession lose their character as suspense preferences and, thus, are never converted into actual items of tax preference. The amount of the suspense preferences which are converted into actual items of tax preference is equal to that portion of the net operating loss attributable to the suspense preferences which offsets taxable income from sources within the United States in taxable years other than the loss year. The determination of the component parts of the net operating loss and the determination of the amount by which the portion of the net operating loss attributable to the suspense preferences offsets taxable income from sources within the United States is made on a year-by-year basis in the same order as the net operating loss is used in accordance with section 172(b). Such determination is made by applying deductions attributable to United States source income first against such income and applying deductions attributable to income from sources within a foreign country or possession of the United States first against income from sources within such country or possession and in accordance with the following principles:
(a) Deductions attributable to items or classes of gross income from sources within the United States offset taxable income from sources within the United States before any remaining deductions;
(b) Deductions attributable to items or classes of gross income from sources within any foreign country or possession of the United States which are not suspense preferences (referred to in this paragraph as “other foreign deductions”) offset taxable income from sources within such country or possession before any remaining deductions;
(c) Suspense preferences attributable to items or classes of gross income from sources within a foreign country or possession offset any remaining taxable income from sources within such foreign country or possession after application of (b) of this subdivision (ii) before any remaining deductions;
(d) Suspense preferences from each foreign country and possession (remaining after application of (c) of this subdivision (ii)) offset taxable income from sources within the Unted States (remaining after application of (a) of this subdivision (ii)) before other foreign deductions pro rata on the basis of the total of such suspense preferences;
(e) Other foreign deductions from each foreign country and possession (remaining after application of (b) of this subdivision (ii)) offset taxable income from sources within the United States (remaining after application (a) and (b) of this subdivision (ii)) pro rata on the basis of the total of such other foreign deductions;
(f) Deductions attributable to income from sources within the United States (remaining after application of (a) of this subdivision (ii)) offset taxable income from sources within any foreign country or possession before any foreign deductions;
(g) Other foreign deductions from each foreign country and possession (remaining after application of (b) and (e) of this subdivision (ii)) offset taxable income from sources within any other foreign countries or possessions (remaining after application of (f) of this subdivision (ii)) pro rata on the basis of the total of such other foreign deductions; and
(h) Suspense preferences (remaining after the application of (c) and (d) of this subdivision (ii)) offset taxable income from sources within any foreign country or possession (remaining after the application of paragraphs (f) and (g) of this subdivision (ii)) pro rata on the basis of the total of such suspense preferences.
(iii) Examples. The principles of this subparagraph may be illustrated by the following examples in each of which the per-country foreign tax credit limitation is applicable. For purposes of these examples, personal deductions and exemptions are disregarded.
United States France Germany United Kingdom Gross income $180,000 $165,000 $50,000 $75,000 Deductions: Preference (45,000) Other (120,000) (125,000) (80,000) (100,000) Taxable income (or loss) 60,000 40,000 (30,000) (70,000)
(b) If the French taxable income is $15,000 instead of $40,000, a $25,000 net operating loss (on a worldwide basis) results. The determination of the foreign preference items taken into account pursuant to subdivision (i) of this subparagraph is the same as in (a) of this example. Subdivision (ii) of this subparagraph again does not apply since the total potential preference amounts ($45,000) is less than the U.S. taxable income ($60,000).
1 Foreign income amounts before step 2 are: France—$50,000; Germany—$60,000; United Kingdom—$5,000; Belgium—$45,000. 2 Not applicable. [In thousands of dollars] 1 Suspense preferences converted to actual items of tax preference. 2 Not applicable. United States France Germany United Kingdom Belgium Gross income $250,000 $50,000 $60,000 $5,000 $45,000 Deductions: Preferences (35,000) (70,000) (95,000) Other (100,000) (75,000) (30,000) (40,000) Taxable income (or loss) 150,000 (60,000) (40,000) (90,000) 5,000 France $35,000 Germany 40,000 United Kingdom 90,000 Belgium 0 Total 165,000 France (35,000 / 165,000 × $150,000)—$31,818 Germany (40,000 / 165,000 × $150,000)—$36,364 United Kingdom (90,000 / 165,000 × $150,000)—$81,818 Belgium (0 / 165,000 × $150,000)—$0 Total $150,000 (a) (b) (c) (d) Preferences Loss U.S. taxable income Smallest of (a), (b), or (c) France $35,000 $60,000 $81,818 $31,818 Germany 70,000 40,000 36,364 36,364 United Kingdom 95,000 90,000 81,818 81,818 Belgium Total 150,000 Explanation Deductions United States France Germany United Kingdom preferences Belgium other Preferences Other Preferences Other $100,000 $35,000 $75,000 $70,000 $30,000 $95,000 $40,000 1. U.S. deductions against U.S. income ($250,000) (100,000) 2. Other foreign deductions against foreign income (per-country) 1 (50,000) (30,000) (40,000) 3. Suspense preferences against remaining foreign income (per-country) (30,000) (5,000) 4. Suspense preferences against remaining U.S. income: France (35,000 / 165,000 × $150,000) (31,818) Germany (40,000 / 165,000 × $150,000) (36,364) U.K. (90,000 / 165,000 × $150,000) (81,818) 5. Other foreign deductions against remaining U.S. income (0) (2) (2) (2) (2) (2) (2) (2) 6. U.S. deductions against other foreign income (2) (2) (2) (2) (2) (2) (2) 7. Other foreign deductions against remaining foreign income ($5,000) (5,000) 8. Suspense preferences against remaining foreign income (0): (2) (2) (2) (2) (2) (2) (2) Balance (components of NOL) 3,182 20,000 3,636 8,182 United States France Germany United Kingdom $100,000 $60,000 $20,000 $30,000 Deductions attributable to income from sources within the United States $25,000 Suspense preferences attributable to income from sources within France $75,000 Deductions other than suspense preferences attributable to income from sources within France $85,000 Deductions other than suspense preferences attributable to sources within the Netherlands $50,000 1973 income 1972 net operating loss United States France Germany United Kingdom United States French suspense preferences French other deductions Dutch other deductions 100 60 20 30 25 75 85 50 U.S. deductions against U.S. income (25) (25) Other foreign deductions against foreign income (per-country) (60) (60) Suspense preferences against remaining foreign income (per-country) (2) (2) (2) (2) (2) (2) (2) (2) Suspense preferences against remaining U.S. income (1 75) (75) Other foreign deductions against remaining U.S. income (2) (2) (2) (2) (2) (2) (2) (2) U.S. deductions against remaining foreign income (2) (2) (2) (2) (2) (2) (2) (2) Other foreign deductions against remaining foreign income: French (25,000/75,000 × $50,000) (16.7) (16.7) Dutch (50,000/75,000 × $50,000) (33.3) (33.3) Suspense preferences against remaining foreign income (2) (2) (2) (2) (2) (2) (2) (2) Balance (1972 carryover to 1974) 8.3 16.7
(3) Separate limitation under section 904(f). In the case of a taxpayer subject to the separate limitation on interest income under section 904(f), the provisions of this paragraph shall be applied in the same manner as in subparagraph (2) of this paragraph. If the taxpayer has elected the overall foreign tax credit limitation, subparagraph (2) of this paragraph shall be applied as if all income from sources within any foreign countries or possessions of the United States and deductions relating to income from such sources other than income or deductions subject to the separate limitation under section 904(f) were from a single foreign country.
(4) Carryover of excess taxes. For rules relating to carryover of excess taxes described in paragraph (1) of section 56(c) when suspense preferences are converted to actual items of tax preference, see § 1.56A-5(f).
(5) Character of amounts. Where the amounts from sources within a foreign country or possession of the United States (or all such countries or possessions in the case of a taxpayer who has elected the overall foreign tax credit limitation) which are treated as reducing chapter 1 tax on income from sources within the United States or as suspense preferences are less than the total items of tax preference described in subparagraph (1)(i)(a) of this paragraph attributable to such sources, the amounts so treated are considered derived proportionately from each such item of tax preference.