Page:United States Statutes at Large Volume 76.djvu/1058

 1010

PUBLIC LAW 87-834-OCT. 16, 1962

[76 STAT.

"(3) the foreign base company services income for the taxable year (determined under subsection (e) and reduced as provided in subsection (b)(5)). "(b)

EXCLUSIONS AND SPECIAL RULES.— "(1) EXCLUSION OF CERTAIN DIVIDENDS, INTEREST, AND GAINS FROM QUALIFIED INVESTMENTS I N LESS DEVELOPED COUNTRIES.—FOR

Post, p. 1013.

purposes of subsection (a), foreign base company income does not include— " (A) dividends and interest received during the taxable year from investments which at the time of receipt are qualified investments in less developed countries (as defined in section 955(b)), or " (B) if the gains from the sale or exchange during the taxable year of investments which at the time of sale or exchange are qualified investments in less developed countries exceed the losses from the sale or exchange during the taxable year of such qualified investments, the amount by which such gains exceed such losses. The preceding sentence shall apply only to the extent that the sum of the dividends and interest described in subparagraph (A) and the amount described in subparagraph (B) does not exceed the increase for the taxable year in qualified investments in less developed countries of the controlled foreign corporation (as determined under subsection (f)). " (2) EXCLUSION OF CERTAIN SHIPPING INCOME.—For purposes of subsection (a), foreign base company income does not include income derived from, or in connection with, the use (or hiring or leasing for use) of any aircraft or vessel in foreign commerce, or the performance of services directly related to the use of any such aircraft or vessel. "(3)

S P E C I A L RULE W H E R E FOREIGN BASE C O M P A N Y I N C O M E IS LESS

THAN 30 PERCENT OR MORE THAN 7 0 PERCENT OF GROSS I N C O M E. — For

purposes of subsection (a)— " (A) If the foreign base company income (determined without regard to paragraphs (1) and (5)) is less than 30 percent of gross income, no part of the gross income of the a. >s taxable year shall be treated as foreign base company income. " (B) I f the foreign base company income (determined if without regard to paragraphs (1) and (5)) exceeds 70 percent of gross income, the entire gross income of the taxable ', year shall, subject to the provisions of paragraphs (1), (2), (4), and (5), be treated as foreign base company income. "(4)

EXCEPTION FOR FOREIGN CORPORATIONS NOT AVAILED OF TO

REDUCE TAXES.—For purposes of subsection (a), foreign base company income does not include any item of income received by a controlled foreign corporation if it is established to the satisfaction of the Secretary or his delegate \ ith respect to such item that the creation or organization of the iontrolled foreign corporation receiving such item under the laws of the foreign country in which it is incorporated does not have the effect of substantial reduction of income, war profits, or excess profits taxes or similar taxes. " (5) DEDUCTIONS TO BE TAKEN INTO ACCOUNT.—For purposes of

subsection (a), the foreign personal holding company income, the foreign base company sales income, and the foreign base company services income shall be reduced, under regulations prescribed by the Secretary or his delegate, so as to take into account deductions (including taxes) properly allocable to such income.

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