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TITLE 26-INTERNAL REVENUE CODE (2) such person owns, within the meaning of section 958(a), or is considered as owning by applying the rules of ownership of section 958(b), 10 percent or more of the total com- bined voting power of all classes of stock enti- tled to vote of such foreign corporation at any time during the 5-year period ending on the date of the sale or exchange when such foreign corporation was a controlled foreign corporation (as defined in section 957), then the gain recognized on the sale or ex- change of such stock shall be included in the gross income of such person as a dividend, to the extent of the earnings and profits of the foreign corporation attributable (under regula- tions prescribed by the Secretary) to such stock which were accumulated in taxable years of such foreign corporation beginning after De- cember 31, 1962, and during the period or peri- ods the stock sold or exchanged was held by such person while such foreign corporation was a controlled foreign corporation. (b) Limitation on tax applicable to individuals In the case of an individual, if the stock sold or exchanged is a capital asset (within the meaning of section 1221) and has been held for more than 9 months, the tax attributable to an amount included in gross income as a dividend under subsection (a) shall not be greater than a tax equal to the sum of- (1) a pro rata share of the excess of- (A) the taxes that would have been paid by the foreign corporation with respect to its income had it been taxed under this chapter as a domestic corporation (but without allowance for deduction of, or credit for, taxes described in subparagraph (B)), for the period or periods the stock sold or exchanged was held by the United States person in taxable years beginning after De- cember 31, 1962, while the foreign corpora- tion was a controlled foreign corporation, adjusted for distributions and amounts pre- viously included in gross income of a United States shareholder under section 951, over (B) the income, war profits, or excess profits taxes paid by the foreign corpora- tion with respect to such income; and (2) an amount equal to the tax that would result by including in gross income, as gain from the sale or exchange of a capital asset held for more than 9 months, an amount equal to the excess of (A) the amount includ- ed in gross income as a dividend under subsec- tion (a), over (B) the amount determined under paragraph (1). (c) Determination of earnings and profits (1) In general Except as provided in section 312(k)(3), for purposes of this section, the earnings and profits of any foreign corporation for any tax- able year shall be determined according to rules substantially similar to those applicable to domestic corporations, under regulations prescribed by the Secretary. (2) Earnings and profits of subsidiaries of foreign corporations If- (A) subsection (a) or (f) applies to a sale, exchange, or distribution by a United States person of stock of a foreign corporation and, by reason of the ownership of the stock sold or exchanged, such person owned within the meaning of section 958(a)(2) stock of any other foreign corporation; and (B) such person owned, within the mean- ing of section 958(a), or was considered as owning by applying the rules of ownership of section 958(b), 10 percent or more of the total combined voting power of all classes of stock entitled to vote of such other foreign corporation at any time during the 5-year period ending on the date of the sale or ex- change when such other foreign corpora- tion was a controlled foreign corporation (as defined in section 957), then, for purposes of this section, the earn- ings and profits of the foreign corporation the stock of which is sold or exchanged which are attributable to the stock sold or ex- changed shall be deemed to include the earn- ings and profits of such other foreign corpo- ration which- (C) are attributable (under regulations prescribed by the Secretary) to the stock of such other foreign corporation which such person owned within the meaning of section 958(a)(2) (by reason of his ownership within the meaning of section 958(a)(1)(A) of the stock sold or exchanged) on the date of such sale or exchange (or on the date of any sale or exchange of the stock of such other foreign corporation occurring during the 5-year period ending on the date of the sale or exchange of the stock of such for- eign corporation, to the extent not other- wise taken into account under this section but not in excess of the fair market value of the stock of such other foreign corporation sold or exchanged over the basis of such stock (for determining gain) in the hands of the transferor); and (D) were accumulated in taxable years of such other corporation beginning after De- cember 31, 1962, and during the period or periods- (i) such other corporation was a con- trolled foreign corporation, and (it) such person owned within the mean- ing of section 958(a)(2) the stock of such other foreign corporation. (d) Exclusions from earnings and profits For purposes of this section, the following amounts shall be excluded, with respect to any United States person, from the earnings and profits of a foreign corporation: (1) Amounts included in gross income under sec- tion 951 Earnings and profits of the foreign corpora- tion attributable to any amount previously in- cluded in the gross income of such person under section 951, with respect to the stock sold or exchanged, but only to the extent the inclusion of such amount did not result in an exclusion of an amount from gross income under section 959. (2) Gain realized from the sale or exchange of property in pursuance of a plan of complete liquidation If a foreign corporation adopts a plan of complete liquidation in a taxable year of a § 1248 Page 702