26 CFR §1.852-12 — -12 Non-RIC earnings and profits.

1. (a)Applicability of section 852(a)(2)(A)
   1. (1)In general. An investment company does not satisfy section 852(a)(2)(A) unless—
      1. (i)Part I of subchapter M applied to the company for all its taxable years ending on or after November 8, 1983; and
      2. (ii)For each corporation to whose earnings and profits the investment company succeeded by the operation of section 381, part I of subchapter M applied for all the corporation's taxable years ending on or after November 8, 1983.
   2. (2)Special rule. See section 1071(a)(5)(D) of the Tax Reform Act of 1984, Public Law 98-369 (98 Stat. 1051), for a special rule which treats part I of subchapter M as having applied to an investment company's first taxable year ending after November 8, 1983.
2. (b)Applicability of section 852(a)(2)(B)
   1. (1)In general. An investment company does not satisfy section 852(a)(2)(B) unless, as of the close of the taxable year, it has no earnings and profits other than earnings and profits that—
      1. (i)Were earned by a corporation in a year for which part I of subchapter M applied to the corporation and, at all times thereafter, were the earnings and profits of a corporation to which part I of subchapter M applied;
      2. (ii)By the operation of section 381 pursuant to a transaction that occurred before December 22, 1992, became the earnings and profits of a corporation to which part I of subchapter M applied and, at all times thereafter, were the earnings and profits of a corporation to which part I of subchapter M applied;
      3. (iii)Were accumulated in a taxable year ending before January 1, 1984, by a corporation to which part I of subchapter M applied for any taxable year ending before November 8, 1983; or
      4. (iv)Were accumulated in the first taxable year of an investment company that began business in 1983 and that was not a successor corporation.
   2. (2)Prior law. For purposes of paragraph (b) of this section, a reference to part I of subchapter M includes a reference to the corresponding provisions of prior law.
3. (c)Effective date. This regulation is effective for taxable years ending on or after December 22, 1992.
4. (d)For treatment of net built-in gain assets of a C corporation that become assets of a RIC, see § 1.337(d)-5T.