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portion of the gross income which consists of:
* * * * * * *
(B) Certain property transactions.--The
excess of gains over losses from the sale or
exchange of property--
* * * * * * *
(iii) which does not give rise to any income.
B. The Regulations
1. Regulations Under Section 954(c)(1)(B)(iii)
In pertinent part, section 1.954-2(e)(3), Income Tax Regs.,
which defines “property that does not give rise to income”,
provides:
(3) Property that does not give rise to income.
Except as otherwise provided in this paragraph (e)(3),
for purposes of this section, the term property that
does not give rise to income includes all rights and
interests in property (whether or not a capital asset)
including, for example, forwards, futures and options.
Property that does not give rise to income shall not
include--
* * * * * * *
(ii) Tangible property (other than real
property) used or held for use in the
controlled foreign corporation’s trade or
business that is of a character that would be
subject to the allowance for depreciation
under section 167 or 168 and the regulations
under those sections (including tangible
property described in section 1.167(a)-2);
(iii) Real property that does not give
rise to rental or similar income, to the
extent used or held for use in the controlled
foreign corporation’s trade or business;
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Last modified: May 25, 2011