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income of the affiliated group (other
than foreign affiliates) derived from
covered sales of units of the product
produced * * *, in whole or in part, by
the electing corporation in a
possession.
(II) Computation of combined
taxable income.--Combined taxable income
shall be computed separately for each
product produced * * *, in whole or in
part, by the electing corporation in a
possession. Combined taxable income
shall be computed (notwithstanding any
provision to the contrary) for each such
product * * * by deducting from the
gross income of the affiliated group
(other than foreign affiliates) derived
from covered sales of such product * * *
all expenses, losses, and other
deductions properly apportioned or
allocated to gross income from such
sales * * * and a ratable part of all
expenses, losses, or other deductions
which cannot definitely be allocated to
some item or class of gross income,
which are incurred by the affiliated
group (other than foreign affiliates).
* * *
* * * * * * *
(7) Regulations.--The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this subsection * * *
[Emphasis added.]
In the simplest terms, section 936(a) allows for a tax
credit. The amount of this credit is equal to the portion of tax
attributable to the "taxable income" derived from conducting
business in a possession. Section 936(h) determines the
treatment of intangible property income. Intangible property is
broadly defined in section 936(h) and includes, of relevance
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Last modified: May 25, 2011