Page:United States Statutes at Large Volume 98 Part 1.djvu/693

 PUBLIC LAW 98-369—JULY 18, 1984

98 STAT. 645

'(d) TREATMENT OF RELATED PERSON FACTORING INCOME.—

"(1) IN GENERAL.—For purposes of the provisions set forth in paragraph (2), if any person acquires (directly or indirectly) a trade or service receivable from a related person, any income of such person from the trade or service receivable so acquired shall be treated as if it were interest on a loan to the obligor under the receivable. "(2) PROVISIONS TO WHICH PARAGRAPH ( D APPLIES.—The provisions set forth in this paragraph are as follows: "(A) Part III of subchapter G of this chapter (relating to foreign personal holding companies). "(B) Section 904 (relating to limitation on foreign tax credit). "(C) Subpart F of part III of this subchapter (relating to controlled foreign corporations). "(3) TRADE OR SERVICE RECEIVABLE.—For purposes of this subsection, the term 'trade or service receivable' means any account receivable or evidence of indebtedness arising out of— "(A) the disposition by a related person of property described in section 1221(1), or "(B) the performance of services by a related person. "(4) RELATED PERSON.—For purposes of this subsection, the term 'related person' means— "(A) any person who is a related person (within the meaning of section 267(b)), and "(B) any United States shareholder (as defined in section 951(b)) and any person who is a related person (within the meaning of section 267(b)) to such a shareholder.

26 USC 551. i 26 USC 951.

"(5) CERTAIN PROVISIONS NOT TO APPLY.— "(A) CERTAIN EXCEPTIONS.—The following

provisions shall not apply to any amount treated as interest under paragraph (1) or (6): "(i) Subparagraphs (A), (B), (C), and (D) of section 904(d)(2) (relating to interest income to which separate limitation applies). "(ii) Subparagraph (A) of section 954(b)(3) (relating to exception where foreign base company income is less than 10 percent). "(iii) Subparagraph (B) of section 954(c)(3) (relating to certain income derived in active conduct of trade or business). "(iv) Subparagraphs (A) and (B) of section 954(c)(4) (relating to exception for certain income received from related persons). "(B) SPECIAL RULES FOR POSSESSIONS.— "(i) PUERTO RICO AND POSSESSIONS TAX CREDIT.—Any

amount treated as interest under paragraph (1) shall not be treated as income described in subparagraph (A) or (B) of section 936(a)(1) unless such amount is from sources within a possession of the United States (determined after the application of paragraph (1)). "(ii) VIRGIN ISLANDS CORPORATIONS.—Subsection (b) of

section 934 shall not apply to any amount treated as interest under paragraph (1) unless such amount is from sources within the Virgin Islands (determined after the application of paragraph (1)).


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