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We hold, for petitioners, that they are entitled to the
partial summary judgment they seek on this issue.
3. Analysis
Section 936(a)7 provides that if a qualified domestic
7Sec. 936(a) provides, in pertinent part, as follows:
SEC. 936. PUERTO RICO AND POSSESSION TAX CREDIT.
(a) Allowance of Credit.–-
(1) In general.–-Except as otherwise provided in
this section, if a domestic corporation elects the
application of this section and if the conditions of
both subparagraph (A) and subparagraph (B) of paragraph
(2) are satisfied, there shall be allowed as a credit
against the tax imposed by this chapter [chapter 1,
relating to normal taxes and surtaxes] an amount equal
to the portion of the tax which is attributable to the
sum of–-
(A) the taxable income, from sources without
the United States, from–-
(i) the active conduct of a trade or
business within a possession of the United
States, or
(ii) the sale or exchange of
substantially all of the assets used by the
taxpayer in the active conduct of such trade
or business, and
(B) the qualified possession source
investment income.
(2) Conditions which must be satisfied.–-The
conditions referred to in paragraph (1) are:
(A) 3-year period.–-If 80 percent or more of
the gross income of such domestic corporation for
the 3-year period immediately preceding the close
of the taxable year (or for such part of such
period immediately preceding the close of such
(continued...)
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