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property is subject to the exception provided by this
section, four factual determinations must be made:
(i) What is the trade or business of the
transferee;
(ii) Do the activities of the transferee
constitute the active conduct of that trade or
business;
(iii) Is the trade or business conducted
outside of the United States; and
(iv) Is the transferred property used or
held for use in the trade or business?
Rules concerning these four determinations are provided
in paragraph (b)(2), (3), (4), and (5) of this section.
(2) Trade or business. Whether the
activities of a foreign corporation constitute a trade
or business must be determined under all the facts and
circumstances. In general, a trade or business is a
specific unified group of activities that constitute
(or could constitute) an independent economic
enterprise carried on for profit. For example, the
activities of a foreign selling subsidiary could
constitute a trade or business if they could be
independently carried on for profit, even though the
subsidiary acts exclusively on behalf of, and has
operations fully integrated with, its parent
corporation. To constitute a trade or business, a
group of activities must ordinarily include every
operation which forms a part of, or a step in, a
process by which an enterprise may earn income or
profit. In this regard, one or more of such activities
may be carried on by independent contractors under the
direct control of the foreign corporation. (However,
see paragraph (b)(3) of this section.) The group of
activities must ordinarily include the collection of
income and the payment of expenses. If the activities
of a foreign corporation do not constitute a trade or
business, then the exception provided by this section
does not apply, regardless of the level of activities
carried on by the corporation. * * *
* * * * * * *
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