Foreign Base Company Sales Income under the New U.S. Regulations

28 Pages Posted: 15 Mar 2009 Last revised: 5 May 2009

See all articles by Lawrence Lokken

Lawrence Lokken

University of Florida College of Law

Date Written: March 13, 2009


U.S. shareholders of a controlled foreign corporation (CFC) are currently taxed by the United States on their ratable shares of the CFC's subpart F income, even if the CFC distributes none of its earnings to shareholders as dividends. The Treasury, in late 2008, revised its regulations on one category of subpart F income, foreign base company (FBC) sales income. The revisions address contract manufacturing arrangements, which U.S. multinationals often use in overseas production, at least sometimes with a purpose of avoiding the impact of the U.S. CFC rules. The revisions also restate some of the rules on branches of CFCs, which often operate in conjunction with the rules on contract manufacturing. This paper describes U.S. law on FBC sales income, after the regulation revisions. It is a draft of material that will be published in Boris I. Bittker & Lawrence Lokken, Federal Taxation of Income, Estates & Gifts (Warren, Gorham & Lamont).

Suggested Citation

Lokken, Lawrence, Foreign Base Company Sales Income under the New U.S. Regulations (March 13, 2009). University of Florida Levin College of Law Research Paper No. 2009-21, Available at SSRN: or

Lawrence Lokken (Contact Author)

University of Florida College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics