Union Carbide Corporation and Subsidiaries - Page 12

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          certain restrictions, select the most favorable of the                       
          administrative pricing methods of section 925(a) in order to                 
          reallocate income generated by export sales from the parent                  
          corporation to the FSC.  The FSC provisions permanently exempt a             
          portion of FSC profits (approximately 65 percent) from tax.  Sec.            
          923(a).  The FSC recognizes the nonexempt portion of its taxable             
          income as income effectively connected with the conduct of a U.S.            
          trade or business.  Sec. 921(d).                                             
               Section 925(a) provides in pertinent part:                              
                    SEC. 925 (a).  In General.--In the case of a sale                  
               of export property to a FSC by a person described in                    
               section 482, the taxable income of such FSC and such                    
               person shall be based upon a transfer price which would                 
               allow such FSC to derive taxable income attributable to                 
               such sale (regardless of the sales price actually                       
               charged) in an amount which does not exceed the                         
               greatest of--                                                           
                         (1) 1.83 percent of the foreign trading gross                 
                    receipts derived from the sale of such property by                 
                    such FSC,                                                          
                         (2) 23 percent of the combined taxable income                 
                    of such FSC and such person which is attributable                  
                    to the foreign trading gross receipts derived from                 
                    the sale of such property by such FSC, or                          
                         (3) taxable income based upon the sale price                  
                    actually charged (but subject to the rules                         
                    provided in section 482).                                          
               Although section 925(a) applies literally only to buy/sell              
          FSC's, Congress authorized the Secretary to prescribe regulations            
          setting forth consistent rules with respect to commission FSC's.             
          Sec. 925(b); General Dynamics Corp. & Subs. v. Commissioner,                 






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