P Corporation forms S Corpora tion as a wholly-owned subsidiary. S quali- fies as a DISC for its taxable year. S has no employees on its payroll. S is granted a xxxx- chise with respect to specified exports of P. P will sell such exports to S for resale by S. Such exports are of a type which produce qualified export receipts as defined in para- graph (b) of this section. P’s sales force will solicit orders in the name of S using S’s order forms. S places orders with P only when S itself has received orders. No inven- tory is maintained by S. P makes shipments directly to customers of S. Employees of P will act for S and xxxxxxxx and collections will be handled by P in the name of S. Under these facts, the income derived by S for such taxable year from the purchase and resale of the specified export is treated for Federal in- come tax purposes as the income of S, and the amount of income allocable to S will be determined under section 994 of the Code.
P Corporation forms S Corpora tion as a wholly-owned subsidiary. S quali- fies as a DISC for its taxable year. S has no employees on its payroll. S is granted a sales franchise with respect to specified exports of P and will receive commissions with respect to such exports. Such exports are of a type which will produce gross receipts for S which are qualified export receipts as defined in paragraph (b) of this section. P’s sales force will solicit orders in the name of X. Xxxxxxxx and collections are handled directly by P. Under these facts, the commissions paid to S for such taxable year with respect to the specified exports shall be treated for Federal income tax purposes as the income of S, and the amount of income allocable to S is deter- mined under section 994 of the Code. [T.D. 7514, 42 XX 00000, Xxx. 17, 1977; 42 FR 60910, Nov. 30, 1977, as amended by T.D. 7854, 47 FR 51739, Nov. 17, 1982]
