720 INCOME TAX . C R E D I T S AGAINST TAX- Contd . Proof of credits . Evidence of foreign income. Ante, p . 718. Segregation . Other information necessary . Taxes of foreign sub- sidiary. Propor tion of forei gn tax on dividends re- ceived deemed to have been paid . Proriso. Limit on credit al- lowed . Meaning of •'accu- mulated profits ." Determination of, by Commissioner . Accounting period for foreign corporation . Corporations treated as foreign. United States posses- sions . Post, p . 738. China Trade Act cor- porations . Post, p . 739 RETURNS AND P AYMENT OF TA X. Consolidated returns of corporations . Pr ivilege of fil ing . 73d C ONGRESS . SESS . II. CH. 277. MAY 10, 1934 . (e) PROOF of CREDIT S .- The cred its prov ided in this sec tion sha ll be allowed only if the taxpayer establishes to the satisfaction of the Commissioner (1) the total amount of income derived from sourc es without the United States, determined as provided in section 119, (2) the amoun t of income derived from each country, the tax p aid or accrued to which is claimed as a credit under this section, such amount to be determined under rules and regulations prescribed by the Commissioner with the approval of the Secretary, and (3) all other in formatio n necess ary for the verif ication and comp utation of such credits . (f) TAXES OF FOREIGN SUBSIDIARY .-For the purposes of this se c- tion a domestic corporation which ow ns a majority of the voting stock of a foreign corporation from which it receives dividends in any taxable year shall be deemed to have paid the same proportion of any income, war-profits, or excess-profits taxes paid by such foreign corporation to any foreign country or to any possession of the United States, upon or with respect to the accumulated profits of such foreign corporation from which such dividends were paid, which the amount of such dividends bears to the amount of such accumulated profits Provided, That the amount of tax deemed to have been paid under this subsection shall in no case exceed the same proportion of the tax against which credit is ta ken which the amount of s uch divi- dends bears to the amount of the entire net income of the domestic corporation in which such dividends are included . The term " accumulated profits " when used in this subsection in reference to a foreign corporation, means the amount of its gains, profits, or income in excess of the income, war-profits, and excess-profits taxes imp os ed up on or wi th re sp ect to such profits or income ; and the Commissioner wi th the approval of the Secretary shall have full power to determine from the accumulated profits of what year or years such dividends were paid ; treating dividends paid in the first sixty days of any year as having been paid from the accumulated profits of the preceding year or years (unless to his satisfaction shown ot herwise) , and in other r espects treating dividend s as hav ing be en pa id fr om the most recently accumulated gains, profits, or earnings. In the case ofa forei gn cor porat ion, the in come, war- profits, and excess-profits taxes of which are determined on the basis of an accounting period of less than one year, the word "year" as used in this subsection shall be construed to mean such accounting period . (g) CORPORATIONS TREATED As FOREIGN .-For the purposes of this section the following corporations shall be treated as foreign cor por ati ons : (1) A corporation entitled to the benefits of section 251, by reason of receiving a large percentage of its gross income from sources within a possession of the United States
(2) A corporation organi zed u nder the Ch ina T rade Act, 1922 . and entitled to the credit provided for in section 261 . Supplem ent D- Return s and Paymen t of Tax [Supplementary to Sub ti tle B, Part V] SEC. 141 . CONSOLIDATED RETURNS OF RAILROAD CORPORATIONS . (a) PRIVILEGE TO FILE CONSOLIDATED RETURNS .-An affiliated group of corporations shall, subject to the provisions of this section, have the privilege of making a consolidated return for the taxable year in lieu of separate returns . The making of a consolidated return shall be upon the condition that all the corporations which
