Page:United States Statutes at Large Volume 76.djvu/1060

 1012

PUBLIC LAW 8 7 - 8 3 4 - O C T. 16, 1962

[76 STAT.

" (B) the property is sold for use, consumption, or disposition outside such foreign country, or, in the case of property purchased on behalf of a related person, is purchased for use, consumption, or disposition outside such foreign country. "(2) CERTAIN BRANCH INCOME.—For purposes of determining foreign base company sales income in situations in which the carrying on of activities by a controlled foreign corporation through a brancli or similar establishment outside the country of incorporation of the controlled foreign corporation has substantially the same effect as if such branch or similar establishment were a wholly owned subsidiary corporation deriving such income, under regulations prescribed by. the Secretary or his delegate the income attributable to the carrying on of such activities of such branch or similar establishment shall be treated as income derived by a wholly owned subsidiary of the controlled foreign corporation and shall constitute foreign base company sales income of the controlled foreign corporation. "(3) RELATED PERSON DEFINED.—For purposes of this section, a person is a related person with respect to a controlled foreign corporation, if— " (A) such person is an individual, partnership, trust, or estate which controls the controlled foreign corporation; " (B) such person is a corporation which controls, or is controlled by, the controlled foreign corporation; or " (C) such person is a corporation which is controlled by the same person or persons which control the controlled foreign corporation. For purposes of the preceding sentence, control means the ownership, directly or indirectly, of stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote. For purposes of this paragraph, the rules for determining ownership of sto^k prescribed by section 958 shall apply. " (e) FOREIGN BASE COMPANY SERVICES INCOME.—For purposes of

subsection (a)(3), the term 'foreign base company services income' means income (whether in the form of compensation, commissions, fees, or otherwise) derived in connection with the performance of technical, managerial, engineering, architectural, scientific, skilled, industrial, commercial, or Tike services which— "(1) are performed for or on behalf of any related person (within the meaning of subsection (d)(3)), and "(2) are performed outside the country under the laws of which the controlled foreign corporation is created or organized. The preceding sentence shall not apply to income derived in connection with the performance of services which are directly related to the sale or exchange by the controlled foreign corporation of property manufactured, produced, grown, or extracted by it and which are performed prior to the time of the sale or exchange, or of services directly related to an offer or effort to sell or exchange such property. "(f)

Post, p. 1013.

INCREASE I N QXTALIFIED INVESTMENTS I N LESS DEVEIX)PED

COUNTRIES.—For purposes of subsection (b)(1), the increase for any taxable year in qualified investments in less developed countries of any controlled foreign corporation is the amount by which— "(1) the qualified investments in less developed countries (as defined in section 055(b)) of the controlled foreign corporation at the close of the taxable year, exceeds

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