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TITLE 26-INTERNAL REVENUE CODE treated as having such capacity with re- spect to such domestic parent corporation; and (B) the determination of whether such in- dividual is a highly compensated employee shall be made by treating such individual's total compensation (determined with the application of paragraph (2) of this subsec- tion) as compensation paid by such domes- tic parent corporation and by determining such individual's status with regard to such domestic parent corporation. (2) Determination of compensation For purposes of applying paragraph (5) of section 401(a) with respect to an individual who is treated as an employee of a domestic parent corporation under subsection (a), the total compensation of such individual shall be the remuneration paid to such individual by the domestic subsidiary which would consti- tute his total compensation if his services had been performed for such domestic parent cor- poration, and the basic or regular rate of com- pensation of such individual shall be deter- mined under regulations prescribed by the Secretary. (c) Termination of status as deemed employee not to be treated as separation from service for pur- poses of capital gain provisions and limitations of tax For purposes of applying subsections (a)(2) and (e) of section 402, and section 403(a)(2) with respect to an individual who is treated as an employee of a domestic parent corporation under subsection (a), such individual shall not be considered as separated from the service of such domestic parent corporation solely by reason of the fact that- (1) the corporation of which such individual is an employee ceases, for any taxable year, to be a domestic subsidiary within the meaning of subsection (a)(2)(A), (2) such individual ceases to be an employee of a domestic subsidiary of such domestic parent corporation, if he becomes an employ- ee of another corporation controlled by such domestic parent corporation, or (3) the provision of the plan described in subsection (a)(1)(A) is terminated. (d) Deductibility of contributions For purposes of applying sections 404 and 405(c) with respect to contributions made to or under a pension, profit-sharing, stock bonus, annuity, or bond purchase plan by a domestic parent corporation, or by another 7orporation which is entitled to deduct its contributions under section 404(a)(3)(B), on behalf of an indi- vidual who is treated as an employee of such domestic corporation under subsection (a)- (1) except as provided in paragraph (2), no deduction shall be allowed to such domestic parent corporation or to any other corpora- tion which is entitled to deduct its contribu- tions under such sections, (2) there shall be allowed as a deduction to the domestic subsidiary of which such indi- vidual is an employee an amount equal to the amount which (but for paragraph (1)) would be deductible under section 404 (or section 405(c)) by the domestic parent corporation if he were an employee of the domestic parent corporation, and (3) any reference to compensation shall be considered to be a reference to the total com- pensation of such individual (determined with the application of subsection (b)(2)). Any amount deductible by a domestic subsid- iary under this subsection shall be deductible for its taxable year with or within which the taxable year of such domestic parent corpora- tion ends. (e) Treatment as employee under related provisions An individual who is treated as an employee of a domestic parent corporation under subsec- tion (a) shall also be treated as an employee of such domestic parent corporation, with respect to the plan described in subsection (a)(1)(A), for purposes of applying the following provi- sions of this title: (1) Section 72(d) (relating to employees' an- nuities). (2) Section 72(f) (relating to special rules for computing employees' contributions). (3) Section 101(b) (relating to employees' death benefits). (4) Section 2039 (relating to annuities). (5) Section 2517 (relating to certain annu- ities under qualified plans). (Added Pub. L. 88-272, title II, § 220(b), Feb. 26, 1964, 78 Stat. 60, and amended Pub. L. 91-172, title V, § 515(c)(3), Dec. 30, 1969, 83 Stat. 646; Pub. L. 93-406, title II, §§ 1016(a)(5), 2005(c)(13), Sept. 2, 1974, 88 Stat. 929, 992; Pub. L. 94-455, title XlX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (b)(2). Pub. L. 94-455 struck out "or his delegate" following "Secretary". 1974-Subsec. (b)(1). Pub. L. 93-406, § 1016(a)(5), substituted "section 401(a)(4) and section 410(b) (with- out regard to paragraph (1)(A) thereof)" for "para- graphs (3)(B) and (4) of section 401(a)". Subsec. (c). Pub. L. 93-406, § 2005(c)(13), substituted "subsections (a)(2) and (e) of section 402" for "section 72(n), section 402(a)(2)". 1969-Subsec. Cc). Pub. L. 91-172 substituted "provi- sions and limitation of tax" for "provisions" in subsec. catchline, substituted "section 72(n), section 402(a)(2)," for "section 402(a)(2)". EFFECTIVE DATE OF 1974 AMENDMENT Amendment of subsec. (b)(1) of this section by Pub. L. 93-406 applicable, except as otherwise provided in section 1017(c) through (h) of Pub. L. 93-406, for plan years beginning after Sept. 2, 1974, but, in the case of plans in existence on Jan. 1, 1974, amendment by Pub. L. 93-406 applicable for plan years beginning after Dec. 31, 1975, see section 1017 of Pub. L. 93-406, set out as an Effective Date; Transitional Rules note under section 410 of this title. Amendment of subsec. (c) of this section by Pub. L. 93-406 applicable only with respect to distributions or payments made after Dec. 31, 1973, in taxable years beginning after Dec. 31, 1973, see section 2005(d) of Pub. L. 93-406, set out as an Effective Date of 1974 Amendment note under section 402 of this title. EFFECTIVE DATE OF 1969 AMENDMENT Amendment by Pub. L. 91-172 applicable to taxable years ending after Dec. 31, 1969, see section 515(d) of Pub. L. 91-172, set out as an Effective Date of 1969 Amendment note under section 402 of this title. Page 316