Up to half the profit on goods sold through a foreign branch counts as foreign
What the document says“shall be treated as from sources without the United States, except that the amount so treated shall not exceed 50 percent of the income from the sale or exchange of such inventory property.”
The section adds a new paragraph (6) to section 904(b) of the Internal Revenue Code of 1986. Where a United States person keeps an office or other fixed place of business in a foreign country, income from selling inventory property outside the United States that was produced in the United States, is for use outside the United States and falls under the third sentence of section 863(b), and that is attributable to that office, is treated as foreign source income, up to 50 percent of the income from that sale.
What the document actually says“shall be treated as from sources without the United States, except that the amount so treated shall not exceed 50 percent of the income from the sale or exchange of such inventory property.”
The income counts as coming from outside the United States. No more than half of it may be counted that way.
The goods must be made here and sold abroad. They must be for use abroad. The sale must run through a foreign office of the firm.
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