- 56 - C. Significant Business Presence 1. The Statutory Setting of the Dispute If a possessions corporation has “intangible property income”, then that income is generally treated as income of the possessions corporation’s shareholders, in accordance with rules set forth in section 936(h). However, a possessions corporation may “elect out” under section 936(h)(5)12 and choose to compute 12Par. (5) of sec. 936(h) provides, in pertinent part, as follows: (5) Election Out.–- (A) In general.--The rules contained in paragraphs (1) through (4) do not apply for any taxable year if an election pursuant to subparagraph (F) is in effect to use one of the methods specified in subparagraph (C). (B) Eligibility.-- (i) Requirement of significant business presence.–-An election may be made to use one of the methods specified in subparagraph (C) with respect to a product or type of service only if an electing corporation has a significant business presence in a possession with respect to such product or type of service. An election may remain in effect with respect to such product or type of service for any subsequent taxable year only if such electing corporation maintains a significant business presence in a possession with respect to such product or type of service in such subsequent taxable year. If an election is not in effect for a taxable year because of the preceding sentence, the electing corporation shall be deemed to have revoked the election on the first day of such taxable year. (continued...)Page: Previous 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 Next
Last modified: May 25, 2011