The diminished seventh chord usually appears on the seventh scale degree and resolves to the tonic triad chord. In minor keys, the seventh scale degree is often raised which results in the diminished seventh chord on the raised seventh scale degree. In major keys, the diatonic seventh chord on the seventh scale degree is the half-diminished seventh chord but it is often altered to the diminished seventh chord by lowering the chord seventh (which is borrowing from the parallel minor key). In both of these cases, the diminished seventh chord has no common note names with the coming triad chord on the tonic.
However, in the next figure, we can find a diminished seventh chord that is not used in the usual way. The next figure shows the passage from Schubert’s Moments Musicaux Op. 94 No. 6 in Ab major. In measure 37 and 38, we see the diminished seventh chord on the raised fourth scale degree and the tonic triad chord. We see that the diminished seventh chord and the tonic chord have one common note name. This common note name is E and is marked in red in the figure. This is why such a diminished seventh chord is called a common tone diminished seventh chord. Here it appears between the two tonic triad chords and it is used to embellish the tonic triad chord. In fact, the whole passage prolongs the tonic triad chord. Such a static character of the passage can be perceived when listening to it. In the figure, we see the annotation for a common tone diminished seventh chord that is used in this book: a horizontal line labeled with “CT” which connects the common tone diminished seventh chord with the chord it embellish.
Figure: The common tone diminished seventh chord in Schubert’s Moments Musicaux Op. 94 No. 6 in Ab major
In the same way, the common tone diminished seventh chord can appear together with the major triad chord on the fifth scale degree or even the dominant seventh chord on the fifth scale degree. In both of these cases, the dominant (the fifth scale degree) is the common note name.
Common tone diminished seventh chords can also embellish minor triad chords. In such a case, the common tone diminished seventh chord has two common note names with the minor triad chord, instead of one. For instance, the C diminished seventh chord and the C minor triad chord have C and Eb as common note names.
The common tone diminished seventh chord can appear in different chord positions. Also, it can appear spelled differently than here.