- 3 - 1990 and 1991 to 1987-89 and to foreign tax credit carrybacks from 1990 to 1987 and 1988. These adjustments are computational, arising from income adjustments for 1990 and 1991. Introduction Petitioner develops, produces, and markets computer software. During 1990 and 1991, petitioner engaged its wholly owned subsidiary, Microsoft FSC Corp. (MS-FSC), to act as its agent for the international sales of standardized mass-marketed computer products and computer software masters.1 These products were sold/licensed to petitioner’s controlled foreign corporations (CFC’s) and unrelated foreign original equipment manufacturers (foreign OEM’s). 1 Pursuant to the foreign sales corporation provisions (secs. 921 through 927), a domestic corporation may receive favorable tax treatment on a portion of its profits from international sales of its U.S.-made products by selling/leasing such products through a foreign corporate subsidiary (the foreign sales corporation). Specifically, (1) That portion of the foreign sales corporation’s income (known as exempt foreign trade income) is not subject to U.S. taxation in the hands of the foreign sales corporation; (2) the domestic corporation may deduct the commission paid to the foreign sales corporation based upon the amount the foreign sales corporation reports as foreign trade gross receipts (using certain administrative pricing rules); and (3) the domestic corporation can exclude dividend distributions from its foreign subsidiary (e.g., the foreign sales corporation) that are attributable to the foreign sales corporation’s exempt foreign trade income.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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