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TITLE 26-INTERNAL REVENUE CODE graph (4) of subsection (a) (determined with- out regard to the exclusion under paragraph (2) of this subsection)- (A) shall not be considered foreign base company income of such corporation under any other paragraph of subsection (a) and (B) if distributed through a chain of own- ership described under section 958(a), shall not be included in foreign base company income of another controlled foreign corpo- ration in such chain. (7) Special exclusion for foreign base company shipping income Income of a corporation which is foreign base company shipping income under para- graph (4) of subsection (a) (determined with- out regard to the exclusion under paragraph (2) of this subsection) shall be excluded from foreign base company income if derived by a controlled foreign corporation from, or in connection with, the use (or hiring or leasing for use) of an aircraft or vessel in foreign commerce between two points within the for- eign country in which such corporation is cre- ated or organized and such aircraft or vessel is registered. (c) Foreign personal holding company income (1) In general For purposes of subsection (a)(1), the term "foreign personal holding company income" means the foreign personal holding company income (as defined in section 553), modified and adjusted as provided in paragraphs (2), (3), and (4). (2) Rents included without regard to 50 percent limitation For purposes of paragraph (1), all rents shall be included in foreign personal holding company income without regard to whether or not such rents constitute 50 percent or more of gross income. (3) Certain income derived in active conduct of trade or business For purposes of paragraph (1), foreign per- sonal holding company income does not in- clude- (A) rents and royalties which are derived in the active conduct of a trade or business and which are received from a person other than a related person (within the meaning of subsection (d)(3)), (B) dividends, interest, and gains from the sale or exchange of stock or securities de- rived in the conduct of a banking, financing, or similar business, or derived from the in- vestments made by an insurance company of its unearned premiums or reserves ordi- nary and necessary for the proper conduct of its insurance business, and which are re- ceived from a person other than a related person (within the meaning of subsection (d)(3)), or (C) dividends, interest, and gains from the sale or exchange of stock or securities re- ceived from a person other than a related person (within the meaning of subsection (d)(3)) derived from investments made by an insurance company of an amount of its assets equal to one-third of its premiums earned on insurance contracts (other than life insurance and annuity contracts) during the taxable year (as defined in section 832(b)(4)) which are not directly or indirect- ly attributable to the insurance or reinsur- ance of risks of persons who are related per- sons (within the meaning of subsection (d)(3)). (4) Certain income received from related persons For purposes of paragraph (1), foreign per- sonal holding company income does not in- clude- (A) dividends and interest received from a related person which (I) is created or orga- nized under the laws of the same foreign country under the laws of which the con- trolled foreign corporation is created or or- ganized, and (ii) has a substantial part of its assets used in its trade or business located in such same foreign country; (B) interest received in the conduct of a banking, financing, or similar business from a related person engaged in the conduct of a banking, financing, or similar business if the businesses of the recipient and the payor are predominantly with persons other than related persons; and (C) rents, royalties, and similar amounts received from a related person for the use of, or the privilege of using, property within the country under the laws of which the controlled foreign corporation is created or organized. (d) Foreign base company sales income (1) In general For purposes of subsection (a)(2), the term "foreign base company sales income" means income (whether in the form of profits, com- missions, fees, or otherwise) derived in con- nection with the purchase of personal proper- ty from a related person and its sale to any person, the sale of personal property to any person on behalf of a related person, the pur- chase of personal property from any person and its sale to a related person, or the pur- chase of personal property from any person on behalf of a related person where- (A) the property which is purchased (or in the case of property sold on behalf of a re- lated person, the property which is sold) is manufactured, produced, grown, or extract- ed outside the country under the laws of which the controlled foreign corporation is created or organized, and (B) the property is sold for use, consump- tion, or disposition outside such foreign country, or, in the case of property pur- chased on behalf of a related person, is pur- chased for use, consumption, or disposition outside such foreign country. For purposes of this subsection, personal property does not include agricultural com- modities which are not grown in the United States in commercially marketable quantities. (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 branch or simi- lar establishment outside the country of in- corporation of the controlled foreign corpora- tion has substantially the same effect as if Page 605 § 954