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(statutory language), 31 (description), 1962-3 C.B. 1129, 1159.
The committee reports explain as follows:
The “foreign base company sales income” referred to
here means income from the purchase and sale of property,
without any appreciable value being added to the product by
the selling corporation. This does not, for example,
include cases where any significant amount of manufacturing,
major assembling, or construction activity is carried on
with respect to the product by the selling corporation. On
the other hand, activity such as minor assembling,
packaging, repackaging or labeling will not be sufficient to
exclude the profits from this definition.
The sales income with which your committee is primarily
concerned is income of a selling subsidiary (whether acting
as principal or agent) which has been separated from
manufacturing activities of a related corporation merely to
obtain a lower rate of tax for the sales income. This
accounts for the fact that this provision is restricted to
sales of property, to a related person, or to purchases of
property from a related person. Moreover, the fact that a
lower rate for tax for such a company is likely to be
obtained only through purchases and sales outside of the
country in which it is incorporated, accounts for the fact
that the provision is made inapplicable to the extent the
property is manufactured, produced, grown, or extracted in
the country where the corporation is organized or where it
is sold for use, consumption, or disposition in that
country. Mere passage of title or the place of the sale are
not relevant in this connection.
* * * * * * *
(d) Foreign base company sales income.--Paragraph (1)
of subsection (d) corresponds to section 952(e)(2) of the
bill as passed by the House and defines foreign base company
sales income as income (whether in the form of profits,
commissions, fees, or otherwise) derived in connection with:
(1) the purchase of personal property from a
related person and its sale to any person,
(2) the sale of personal property to any person on
behalf of a related person,
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