Under subdivision (ii) of this subparagraph, in the case of minimum or maximum fee arrangements, the determination shall be made on the basis of the actual gross amounts with respect to which such fees are paid, rather than on the basis of the amounts upon which such minimum or maximum fees are computed. All determinations of limitations under this subparagraph shall be made on an aggregate basis and not with respect to separate items or categories of income described in paragraph (b)(1) of § 1.971-1 .
(i) Subpart F income | $35 | |
(ii) Less: $30 export trade income which constitutes foreign base company income, but deduction not to exceed the smallest of the following limitations (smallest of (a), (b), or (c)): | ||
(a) 150 percent of allocable export promotion expenses referred to in subparagraph (2)(i) of this paragraph (150% of $18) | $27 | |
(b) 10 percent of gross receipts and gross amounts referred to in subparagraph (2)(ii) of this paragraph (10% of $310) | $31 | |
(c) Amount which bears to the increase in investments in export trade assets ($32) the same ratio as the export trade income which constitutes foreign base company income ($30) bears to total export trade income ($40) (75% [$30/$40] of $32) | $24 | $24 |
(iii) Subpart F income as reduced under section 970(a) | 11 |
every person who is a United States shareholder, as defined in section 951(b), of such corporation on the last day of such subsequent taxable year on which such corporation is a controlled foreign corporation shall include in his gross income, under section 951(a)(1)(A)(ii) and the regulations thereunder as an amount to which section 955 (as in effect before the enactment of the Tax Reduction Act of 1975) applies, his pro rata share of the amount of such decrease in investments but only to the extent that such pro rata share does not exceed the limitations determined under subparagraph (2) of this paragraph. A United States shareholder's pro rata share of a controlled foreign corporation's decrease for any taxable year in investments in export trade assets shall be his pro rata share of such corporation's decrease for such year determined under section 970(c)(3) and paragraph (d)(3) of this section.
The net amount determined under (b) of this subdivision with respect to any stock owned by the United States shareholder shall be determined without taking into account any amount attributable to a period prior to the date on which such shareholder acquired such stock. See section 1248 and the regulations thereunder for rules governing the treatment of gain from sales or exchanges of stock in certain foreign corporations.
The rules of this subdivision apply only in determining the limitation on a United States shareholder's pro rata share of a controlled foreign corporation's decrease in investments in export trade assets. See section 959 and the regulations thereunder for limitations on the exclusion of previously taxed earnings and profits.
(i) Corporation M's pro rata share of A Corporation's decrease in investments in export trade assets for 1964 (100% of $8) | $8 | ||
(ii) Limitation on amount includible in gross income of M Corporation for 1964 (smaller of (a) or (b)): | |||
(a) Corporation M's pro rata share of A Corporation's earnings and profits for 1963 and 1964 determined under subparagraph (2) of this paragraph (100% of $30) | $30 | ||
(b) Corporation M's pro rata share of amounts by which the subpart F income of A Corporation for 1963 was reduced under section 970(a) (100% of $20) | $20 | ||
Plus: Corporation M's pro rata share of amounts which were not included in subpart F income of A Corporation for 1963 by reason of the application of section 972 | 0 | ||
Total | 20 | ||
Less: Corporation M's pro rata share of the sum of amounts which were previously included in gross income of M Corporation under section 951(a)(1)(A)(ii) by reason of the application of section 970(b) with respect to A Corporation | 0 | 20 | |
(iii) Corporation M's pro rata share includible in gross income for 1964 under section 951(a)(1)(A)(ii) by reason of the application of section 970(b) (smaller of (i) or (ii)) | 8 |
M Corporation
(i) Corporation M's pro rata share of A Corporation's decrease in investments in export trade assets for 1965 (75% of $16) | $12 | ||
(ii) Limitation on amount includible in gross income of M Corporation for 1965 (smaller of (a) or (b)): | |||
(a) Corporation M's pro rata share of A Corporation's earnings and profits for 1963, 1964, and 1965 determined under subparagraph (2) of this paragraph (75% of $28) | $21 | ||
(b) Corporation M's pro rata share of amounts by which the subpart F income of A Corporation for 1963 was reduced under section 970(a) (75% of $20) | $15 | ||
Plus: Corporation M's pro rata share of amounts which were not included in subpart F income of A Corporation for 1963 and 1964 by reason of the application of section 972 | 0 | ||
Total | $15 | ||
Less: Corporation M's pro rata share of the sum of amounts which were previously included in gross income of M Corporation under section 951(a)(1)(A)(ii) by reason of the application of section 970(b) with respect to A Corporation (75% of $8) | 6 | 9 | |
(iii) Corporation M's pro rata share includible in gross income for 1965 under section 951(a)(1)(A)(ii) by reason of the application of section 970(b) (smaller of (i) or (ii)) | 9 | ||
N CORPORATION | |||
(i) Corporation N's pro rata share of A Corporation's decrease in investments in export trade assets for 1965 (25% of $16) | 0 | ||
(ii) Limitation on amount includible in gross income of N Corporation for 1965 (smaller of (a) or (b)): | |||
(a) Corporation N's pro rata share of A Corporation's earnings and profits for 1963, 1964, and 1965 determined under subparagraph (2) of this paragraph (25% of $28) | 07 | ||
(b) Corporation N's pro rata share of amounts by which the subpart F income of A Corporation for 1963 was reduced under section 970(a) (amounts prior to 2/14/65 not being taken into account) | 0 | ||
Plus: Corporation N's pro rata share of amounts which were not included in subpart F income of A Corporation for 1963 and 1964 by reason of the application of section 972 (amounts prior to 2/14/65 not being taken into account) | 0 | ||
Total | 0 | ||
Less: Corporation N's pro rata share of the sum of amounts which were previously included in gross income of N Corporation under section 951(a)(1)(A)(ii) by reason of the application of section 970(b) with respect to A Corporation (amounts prior to 2/14/65 not being taken into account) | 0 | 0 | |
(iii) Corporation N's pro rata share includible in gross income for 1965 under section 951(a)(1)(A)(ii) by reason of the application of section 970(b) (smaller of (i) or (ii)) | 0 |
For purposes of subdivision (ii) of this subparagraph, recognized losses include a write-down of inventory to lower of cost or market in accordance with a method of inventory valuation established or adopted by or on behalf of such foreign corporation under paragraph (c) of § 1.964-1 .
26 C.F.R. §1.970-1