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here, formulas, processes, trademarks, trade names, brand names,
franchises, licenses and contracts, methods, programs, systems,
procedures, campaigns, surveys, studies, forecasts, customer
lists, and technical data. Sec. 936(h)(3)(B)(i),(iii), (iv),
(v). The formula for beverage bases or concentrates for various
soft drinks and syrups is considered intangible property under
section 936(h)(3)(B). See also sec. 1.936-5(a), A-6, Example
(1)(A), Income Tax Regs.
In the absence of an election under section 936(h)(5),
intangible property income is taxed to the U.S. shareholders of
the possessions corporation. If a possessions corporation makes
a valid election, its active trade or business income with
respect to the product for which the election is made is computed
in accordance with the method elected. CRI elected the "profit-
split" method under section 936(h)(5)(C)(ii).
Under the profit-split method, the taxable income of the
"electing corporation", with respect to a product produced in a
possession, is deemed to be 50 percent of the "combined taxable
income" of the "affiliated group" derived from sales of the
product to nonaffiliates or to foreign affiliates.3 The
3The term "electing corporation" means a domestic
corporation for which an election under sec. 936 is in effect.
Sec. 936(h)(5)(E). The term "affiliated group" means the
electing corporation and all other organizations, trades, or
businesses (whether or not incorporated, whether or not organized
in the United States, and whether or not affiliated) owned or
controlled directly or indirectly by the same interest, within
(continued...)
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Last modified: May 25, 2011