Foreign base company sales income of a controlled foreign corporation shall, except as provided in paragraphs a 2a 3 and a 4 of this section, consist of gross income whether in the form of profits, commissionsfees or otherwise derived in connection with the purchase of personal property from a related person and its sale to any personthe sale of personal property to any person on behalf of a related personthe purchase of personal property from any person and its sale to a related personor the purchase of personal property from any person on behalf of a related person.
See section d 1. For purposes of the preceding sentence, except as provided in paragraphs a 2 and a cfc i varor of this section, personal property sold by a controlled foreign corporation will be considered to be the same property that was purchased by the controlled foreign corporation regardless of whether the personal property is sold in the same form in which it was purchased, in a different form than the form in which it was purchased, or as a component part of a manufactured product.
This section shall not apply to the excess of gains over losses from sales or exchanges of securities or from futures transactions, to the extent such excess gains are includible in foreign personal holding company income of the controlled foreign corporation under § 1.
All of the agricultural commodities listed in table I shall be considered grown in the United States in commercially marketable quantities. Bananas, black pepper, cocoa, coconut, coffee, crude rubber, and tea shall not be considered grown in the United States in commercially marketable quantities.
All other agricultural commodities shall not be considered grown in the United States in commercially marketable quantities when, in consideration of all of the facts and circumstances of the individual case, such commodities are shown to be produced in the United States in insufficient quantity and quality to be marketed commercially.
A fish farm is an area where fish are grown or raised artificially protected and cared foras opposed to merely caught or harvested. Subdivision ii shall apply in the computation of foreign base company sales income for taxable years of controlled foreign corporations beginning after December 31,and to taxable years of U.
Foreign base company sales income does not include income derived in connection with the purchase and sale of personal property or purchase or sale of personal property on behalf of a related person in a transaction described in paragraph a 1 of this section if the property is manufactured, produced, constructed, grown, or extracted in the country under the laws of which the controlled foreign corporation which purchases and sells the property or acts on behalf of a related person is created or organized.
See section d 1 A. The principles set forth in paragraphs a 4 ii and a 4 iii of this section apply under this paragraph a 2 in determining what constitutes the manufacture, productionor construction of personal propertyexcluding the requirement set forth in paragraph a 4 i of this section that the provisions of paragraphs a 4 ii and a 4 iii of this section may only be satisfied through the activities of employees of the corporation manufacturing, producing, or constructing the personal property.
The principles of paragraph a 4 iv of this section apply under this paragraph a 2 in determining what constitutes the manufacture, productionor construction of personal property but only when the personal property is manufactured, produced, or constructed by a person related to the controlled foreign corporation within the meaning of § 1.
The application of this paragraph a 2 may be illustrated by the following examples:. Foreign base company sales income does not include income derived in connection with the purchase and sale of personal property or purchase or sale of personal property on behalf of a related person in a transaction described in subparagraph 1 of this paragraph, a if the property is sold for use, consumption, or disposition in the country under the laws of which the controlled foreign corporation which purchases and sells the property or sells on behalf of a related person is created or organized or bwhere the property is purchased by the controlled foreign corporation on behalf of a related personif such property is purchased for use, consumption, or disposition in the country under the laws of which such controlled foreign corporation is created or organized.
See section d 1 B. As a general rulepersonal property which is sold to Söktips och frågor unrelated person will be presumed for purposes of this subparagraph to have been sold for use, consumption, or disposition in the country of destination of the property sold; for such purpose, the occurrence in a country of a temporary interruption in shipment of goods shall not constitute such country the country of destination.
However, if at the time of a sale of personal property to an unrelated person the controlled foreign corporation knew, or should have known from the facts and circumstances surrounding the transactionthat the property probably would not be used, consumed, or disposed of in the country of destination, the controlled foreign corporation must determine the country of ultimate use, consumption, or disposition of the property or the property will be presumed to have been used, consumed, or disposed of outside the country under the laws of which the controlled foreign corporation is created or organized.
A controlled foreign corporation which sells personal property to a related person is presumed to sell such property for use, consumption, or disposition outside the country under the laws of which the controlled foreign corporation is created or organized unless such corporation establishes the use made of the property by the related person ; once it has established that the related person has disposed of the propertythe rules in the two preceding sentences relating to sales by a controlled foreign corporation to an unrelated person will apply at the first stage in the chain of distribution at which a sale is made by a related person to an unrelated person.
Notwithstanding the preceding provisions of this subdivision, a controlled Söktips och frågor corporation which sells personal property to any person all of whose business except for an insubstantial part consists of selling from inventory to retail customers at retail outlets all within one country may assume at the time of such sale to such person that such property will be used, consumed, or disposed of within such country.
For purposes of this subparagraph, a controlled foreign corporation which sells to a purchaser personal property which because of its fungible nature cannot reasonable be specifically traced to other purchasers and to the countries of ultimate use, consumption, or disposition shall, unless such corporation establishes a different disposition as being proper, treat such property as being sold, for ultimate use, consumption, or disposition in those countries, and to those other purchasers, in the same proportions in which property from the fungible mass of the first purchaser is sold in the regular course of business by such first purchaser.
No apportionment need be made, however, on the basis of sporadic sales by the first purchaser. This subdivision shall apply only in a case where the controlled foreign corporation knew, or should have known from the facts and circumstances surrounding the transactionthe manner in which the first purchaser disposes of goods from the fungible mass.
The application of this subparagraph may be illustrated by the following examples:. Foreign base company sales income does not include income of a controlled foreign corporation derived in connection with the sale of personal property manufactured, produced, or constructed by such corporation.
A controlled foreign corporation will have manufactured, produced, or constructed personal property which the corporation sells only if such corporation satisfies the provisions of paragraph a 4 iia 4 iiior a 4 iv of this section through the activities of its employees as defined in § A controlled foreign corporation will not be treated as having manufactured, produced, or constructed personal property which the corporation sells merely because the property is sold in a different form than the form in which it was purchased.