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TITLE 26-INTERNAL REVENUE CODEP such branch or similar establishment were a wholly owned subsidiary corporation deriving such income, under regulations prescribed by the Secretary 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, partner- ship, trust, or estate which controls the con- trolled 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 corpo- ration. For purposes of the preceding sentence, con- trol means the ownership, directly or indirect- ly, 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 stock 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 con- nection with the performance of technical, managerial, engineering, architectural, scientif- ic, skilled, industrial; commercial, or like ser- vices which- (1) are performed for or on behalf of any related person (within the meaning of subsec- tion (d)(3)), and (2) are performed outside the country under the laws of which the controlled for- eign corporation is created or organized. The preceding sentence shall not apply to income derived in connection with the perfor- mance of services which are directly related to the sale or exchange by the controlled foreign corporation of property manufactured, pro- duced, grown, or extracted by it and which are performed prior to the time of the sale or ex- change, or of services directly related to an offer or effort to sell or exchange such proper- ty. (f) Foreign base company shipping income For purposes of subsection (a)(4), the term "foreign base company shipping income" means income derived from, or in connection with, the use (or hiring or leasing for use) of any aircraft or vessel in foreign commerce, or from, or in connection with the performance of services di- rectly related to the use of any such aircraft, or vessel, or from the sale, exchange, or other dis- position of any such aircraft or vessel. Such term includes, but is not limited to- (1) dividends and interest received from a foreign corporation in respect of which taxes are deemed paid under section 902, and gain from the sale, exchange, or other disposition of stock or obligations of such a foreign cor- poration to the extent that such dividends, interest, and gains are attributable to foreign base company shipping income, and (2) that portion of the distributive share of the income of a partnership attributable to foreign base company shipping income. (g) Increase in qualified investments in foreign base company shipping operations For purposes of subsection (b)(2), the in- crease for any taxable year in qualified invest- ments in foreign base company shipping oper- ations of any controlled foreign corporation is the amount by which- (1) the qualified investments in foreign base company shipping operations (as defined in section 955(b)) of the controlled foreign cor- poration at the close of the taxable year, exceed (2) the qualified investments in foreign base company shipping operations (as defined) of the controlled foreign corporation at the close of the preceding taxable year. (Added Pub. L. 87-834, § 12(a), Oct. 16, 1962, 76 Stat. 1009, and amended Pub. L. 91-172, title IX, § 909(a), Dec. 30, 1969, 83 Stat. 718; Pub. L. 94-12, title VI, § 602,b), (c)(1). (2), (d)(1), (e), Mar. 29, 1975, 89 Stat. 58, 60, 64; Pub. L. 94-455, title X, §§ 1023(a), 1024(a), title XIX, §1906(b)(13)(A). Oct. 4, 1976, 90 Stat. 1620, 1834.) AMENDMENTS 1976-Subsecs. (b)(4), (5). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (b)(7). Pub. L. 94-455, § 1024(a), added par. (7). Subsec. (c)(3). Pub. L. 94-455, § 1023(a), added subpar. (C). 1975-Subsec. (a)(4). Pub. L. 94-12, § 602(d)(1)(A), added par. (4). Subsec. (b)(1). Pub. L. 94-12, § 602(c)(1), struck out subsec. (b)(l) which related to the exclusion of certain dividends, interest, and gains from qualified invest- ments in less developed countries. Subsec. (b)(2). Pub. L. 94-12. §602(d)(1)(B), substi- tuted "foreign base company shipping income to the extent that the amount of such income does not exceed the increase for the taxable year in qualified investments in foreign base company shipping oper- ations of the controlled foreign corporation (as deter- mined under subsection (g))" for "income derived from, or in connection with, the use (or hiring or leas- ing for use) of any aircraft or vessel in foreign com- merce, or the performance of services directly related to the use of any such aircraft or vessel" in text and "Exclusion for reinvested shipping income" for "Ex- clusion of certain shipping income" in the par. catch- line. Subsec. (b)(3). Pub, L. 94-12, § 602(d)(1)(C), (D), (e), substituted "10 percent" for "30 percent" in the catch- line, substituted "paragraphs (2) and (5)" for "para- graphs (1) and (5)" and "10 percent" for "30 percent" in subpar. (A), and substituted "paragraphs (2) and (5)" for "paragraphs (1) and (5)" and "paragraphs (2), (4), and (5)" for "paragraphs (1), (2), (4), and (5)" in subpar. (B). Subsec. (b)(5). Pub. L. 94-12, § 602(d)(l)(E), substi- tuted "the foreign base company services income, and the foreign base company shipping income" for "and the foreign base company services income". Subsec. (b)(6). Pub. L. 94-12, § 602(d)(1)(P), added subsec. (b)(6). Page 606