925, one of three methods may be used to calculate the difference between a FSC's taxable income and its FTGR. After determining the FTGR, the taxable income and the direct expenses incurred by the FSC are subtracted from the FTGR.
The $2 million gross income from the sale of the goods is the FSC's FTGR. The transfer pricing rules provide three possible measures of an FSC's taxable income: 1) 1.83% of gross receipts, 2) 23% of combined taxable income, and 3) an arm's-length measure using the transfer pricing rules.
114(e) as gross income attributable to foreign trading gross receipts (FTGRs), as defined in new Sec.
941(b) defines "foreign trade income" as taxable income attributable to FTGRs. Sec.
* Performance of managerial services in connection with any of the foregoing activities, if at least 50% of a taxpayer's other FTGRs for the year are derived from those activities.
942(a) excludes from FTGRs transactions involving property or services for ultimate use in the U.S.
As with the FSC rules, FTGRs arise from a transaction only if economic processes occur outside the U.S.
Nevertheless, taxpayers with $5 million or less of FTGRs do not have to meet the foreign-economic-processes requirements.
A foreign corporation that manufactures property in the ordinary course of its business (or substantially all of the gross receipts of which are FTGRs) may elect domestic corporation treatment and become eligible for ETI benefits.