- 16 - A possession product is an item of property which is the result of a production process carried on in a possession. Sec. 1.936-5(a), A-1, Income Tax Regs. Possession products encompass component products, integrated products, and end-product forms. Id. A component product is a product which is subject to further processing before sale to an unrelated party. Id. An integrated product is (1) a product not subject to any further processing before sale to an unrelated party and (2) a product which includes all component products from which it is produced. Id. A possessions corporation may treat a component product or an integrated product as its possession product even though the final stage or stages of production occur outside the possession. Id. Further processing includes transformation, incorporation, assembly, or packaging. Id. For our purposes, the integrated product is syrup or soft drinks, the component product is concentrate, and the possession product is the component concentrate. Again, CRI is both the possessions corporation and the electing corporation within the meaning of section 936. CRI incurs costs in producing and shipping concentrate to the United States. Production costs include direct labor costs and overhead incident to and necessary for production but do not include direct material costs and interest. Secs. 1.936-6(b)(1), Q&A 12, 1.936-5(b)(4), 1.471-11(b), Income Tax Regs. USA and the CBO's incur expenses in selling the syrup and soft drinks. U.S. affiliate expenses allocable and apportionable to the integratedPage: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
Last modified: May 25, 2011