Foreign base company sales income
(2) Foreign base company sales income. The foreign base company sales income to which section 954(d) and 1.954-3 apply, for which purpose there must be established the gross income from (i) All sales by the controlled foreign corporation of its personal property and all purchases or sales of personal property by such corporation on behalf of another person, (ii) Purchases and/or sales of personal property in connection with transactions not involving related persons (as defined in paragraph (e)(2) of 1.954-1), (iii) Purchases and/or sales of personal property manufactured, produced, etc., in the country of incorporation of the controlled foreign corporation, as determined under paragraph (a)(2) of 1.954-3, (iv) Purchases and/or sales of personal property for use, etc., in the country of incorporation of the controlled foreign corporation, as determined under paragraph (a)(3) of 1.954-3, and (v) Sales of personal property manufactured or produced by the controlled foreign corporation, as determined under paragraph (a)(4) of 1.954-3. (3) Foreign base company services income. The foreign base company services income to which section 954(e) and 1.954-4 apply, for which purpose there must be established the gross income from (i) All services performed by the controlled foreign corporation, (ii) Services other than those (as determined under paragraph (b) of 1.954-4) performed for, or on behalf of, a related person, (iii) Services performed in the country of incorporation of the controlled foreign corporation, as determined under paragraph (c) of 1.954-4, and (iv) Services performed in connection with the sale or exchange of, or with an offer or effort to sell or exchange, personal property manufactured, produced, etc., by the controlled foreign corporation, as determined under paragraph (d) of 1.954-4. (4) Foreign base company oil related income. (i) The foreign base company oil related income described in section 954(g) and 1.954-8, for which purpose there must be established, with respect to each foreign country, the gross income derived from (A) The processing of minerals extracted (by the taxpayer or by any other person) from oil or gas wells into their primary products, as determined under section 907(c)(2)(A), (B) The transportation of such minerals or primary products, as determined under section 907(c)(2)(B), (C) The distribution or sale of such minerals or primary products, as determined under section 907(c)(2)(C), (D) The disposition of assets used by the taxpayer in a trade or business described in subdivision (A), (B) or (C), as determined under section 907(c)(2)(D), (E) Dividends, interests, partnership distributions, and other amounts, as determined under section 907(c)(3). (ii) If any of the items of income listed in paragraph (d)(4)(i) of this section arising from sources within a foreign country relates to oil, gas, or a primary product thereof and is described in section 954(g)(1)(A) or (B) and 1.954-8(a)(1)(i) or (ii) (and, hence, is not foreign base company oil related income), then there must be established facts sufficient to verify the amount of such item of income which is not foreign base company oil related income. In this regard, the total quantities of oil, gas and primary products thereof which gave rise to such item of income and the portions of such quantities which were extracted or sold within the foreign country must be established. (5) Qualified investments in less developed countries. For rules in effect for taxable years of foreign corporations beginning before January 1, 1976, see 26 CFR 1.964-4(d)(4) (Revised as of April 1, 1975). (6) Income derived from aircraft or ships. For rules in effect for taxable years of foreign corporations beginning before January 1, 1976, see CFR 1.964-4(d)(5) (Revised as of April 1, 1975). (7) Foreign base company shipping income. The foreign base company shipping income to which section 954(f) and 1.954-6 apply, for which purpose there must be established (i) Gross income derived from, or in connection with, the use (or hiring or leasing for use) of any aircraft or vessel in foreign commerce, as determined under 1.954-6(c), (ii) Gross income derived from, or in connection with, the performance of services directly related to the use of any aircraft or vessel in foreign commerce, as determined under 1.954-6(d), (iii) Gross income incidental to income described in subdivisions (i) and (ii) of this subparagraph, as determined under 1.954-6(e), (iv) Gross income derived from the sale, exchange, or other disposition of any aircraft or vessel used (by the seller or by a person related to the seller) in foreign commerce, (v) Dividends, interest, and gains described in 1.954-6(f) and 1.954(b) (1)(viii), (vi) Income described in 1.954-6(g) (relating to partnerships, trusts, etc.), and (vii) Exchange gain, to the extent allocable to foreign base company shipping income, as determined under 1.952-2(c)(2)(v)(b). (8) Income on which taxes are not substantially reduced. The gross income excluded from foreign base company income under section 954(b)(4) and paragraph (b)(3) or (4) of 1.954-1 in the case of a controlled foreign corporation not availed of to substantially reduce income taxes, the income or similar taxes incurred with respect thereto, and all other factors necessary to verify the application of such exclusion. (9) Qualified investments in foreign base company shipping operations. The foreign base company shipping income that is excluded from foreign base company income under section 954(b)(2) and 1.954-1(b)(1). (10) Special rule for shipping income. The distributions received through a chain of ownership described in section 958(a) which are excluded from foreign base company income under section 954(b)(6)(B) and 1.954-1(b)(2). (11) Deductions. The deductions allocable, under paragraph (c) of 1.954-1, to each of the classes and subclasses of gross income described in subparagraphs (1) through (9) of this paragraph.