Sec. 724. Foreign corporations and corporations entitled to beneits of section 251-Invested capial. Notwithstanding section 715, in the case of a foreign corporation ngaged in trade or business within the United States or having an office or place of business therein, and in the case of a corporation entitled to the benefits of section 251, the invested capital for any taxable year shall be determined in accordance with rules and regulations prescribed by the Commissioner with the approval of the Secretary, under which Sec. 724. (a) General rule.-The daily invested capital for any day of the taxable year shall be the aggregate of the adjusted basis of each United States asset held by the taxpayer on the beginning of such day. In the application of section 720 in reduction of the average inrested capital (determined on the basis of such daily invested capital), the terms "admissible assets" and "inadmissible assets" shall include only United States assets; or Sec. 724. (b) Exception.-If the Commissioner determines that the United States assets of the taxpayer cannot satisfactorily be segregated from its other assets, the invested capital for the taxable year shall Taxable Years year shall be an amount which is the same percentage of the aggregate of the adjusted basis of all assets held by the taxpayer as of the end of the last day of the taxable year which the net income for the taxable year from sources within the United States is of the total net income of the taxpayer for such year. be an amount which is the same per- be an amount which is the same per- of Sec. 724. (c) Definition of Sec. 724. (c) Definition of Sec. 724. (c) Definition United States asset.-As used in United States asset.-As used in United States asset.-As used in this subsection, the term "United this subsection, the term "United this subsection, the term “United States asset" means an asset held States asset" means an asset held States asset" means an asset held by the taxpayer in the United by the taxpayer in the United by the taxpayer in the United States, determined in accordance States, determined in accordance States, determined in accordance with rules and regulations pre- with rules and regulations pre- with rules and regulations prescribed by the Commissioner with scribed by the Commissioner with scribed by the Commissioner with the approval of the Secretary. the approval of the Secretary. the approval of the Secretary. Sec. 725. (a) Definition.-As Sec. 725. (a) Definition.-As Sec. 725. (a) Definition. As used in this subchapter, the term used in this subchapter, the term used in this subchapter, the term "personal service corporation" "personal service corporation" "personal service corporation" means a corporation whose income means a corporation whose income means a corporation whose income is to be ascribed primarily to the is to be ascribed primarily to the is to be ascribed primarily to the activities of shareholders who are activities of shareholders who are activities of shareholders who are regularly engaged in the active con- regularly engaged in the active con- regularly engaged in the active conduct of the affairs of the corpora- duct of the affairs of the corpora- duct of the affairs of the corporation and are the owners at all times tion and are the owners at all times tion and are the owners at all times during the taxable year of at least during the taxable year of at least during the taxable year of at least 70 per centum in value of each class 70 per centum in value of each class 70 per centum in value of each class of stock of the corporation, and in of stock of the corporation, and in of stock of the corporation, and in which capital is not a material which capital is not a material which capital is not a material income-producing factor; but does income-producing factor; but does income-producing factor; but does not include any foreign corpora- not include any foreign corporation, tion, nor any corporation 50 per nor any corporation 50 per centum centum or more of whose gross in- or more of whose gross income concome consists of gains, profits, or sists of gains, profits, or income income derived from trading as a derived from trading as a principal. principal. For the purposes of For the purposes of this subsection, this subsection, an individual shall an individual shall be considered as be considered as owning, at any owning, at any time, the stock time, the stock owned at such time owned at such time by his spouse by his spouse or minor child or by or minor child or by any guardian any guardian or trustee represent- or trustee representing them. ing them. not include any foreign corporation, nor any corporation 50 per centum or more of whose gross income consists of gains, profits, or income derived from trading as a principal. For the purposes of this subsection, an individual shall be considered as owning, at any time, the stock owned at such time by his spouse or minor child or by any guardian or trustee representing them. Sec. 725. (b) Election as to tax- Sec. 725. (b) Election as to tax- Sec. 725. (b) Election as to taxability. If a personal service cor- ability.-If a personal service cor- ability.-If a personal service corporation signifies, in its return poration signifies, in its return poration signifies, in its return under Chapter 1 for any taxable under Chapter 1 for any taxable under Chapter 1 for any taxable year, its desire not to be subject to year, its desire not to be subject to year, its desire not to be subject to Sec. 725. (a) Definition.-As used in this subchapter, the term "personal service corporation" means a corporation whose income is to be ascribed primarily to the activities of shareholders who are regularly engaged in the active conduct of the affairs of the corporation and are the owners at all times during the taxable year of at least 70 per centum in value of each class of stock of the corporation, and in which capital is not a material income-producing factor; but does not include any foreign corporation, nor any corporation 50 per centum or more of whose gross income consists of gains, profits, or income derived from trading as a principal. For the purposes of this subsection, an individual shall be considered as owning, at any time, the stock owned at such time by his spouse or minor child or by any guardian or trustee representing them. Sec. 725. (b) Election as to taxability. If a personal service corporation signifies, in its return under Chapter 1 for any taxable year, its desire not to be subject to Taxable Years Taxable Years Taxable Years the tax imposed under this sub- the tax imposed under this sub- the tax imposed under this subchapter for such taxable year, it chapter for such taxable year, it chapter for such taxable year, it shall be exempt from such tax for shall be exempt from such tax for shall be exempt from such tax for such year, and the provisions of such year, and the provisions of such year, and the provisions of Supplement S of Chapter 1 shall Supplement S of Chapter 1 shall Supplement S of Chapter 1 shall apply to the shareholders in such apply to the shareholders in such apply to the shareholders in such corporation who were such share- corporation who were such share- corporation who were such shareholders on the last day of such tax-holders on the last day of such tax- holders on the last day of such taxable year of the corporation. Such able year of the corporation. Such able year of the corporation. corporation shall not be exempt for corporation shall not be exempt for such year if it is a member of an such year if it is a member of an affiliated 'group of corporations fil- affiliated group of corporations filing consolidated returns under sec-ing consolidated returns under section 141. tion 141. Sec. 725 (b), I. R. C., amended by Sec. 223 (b), R. A. of 1942, to read as above. Sec. 201 of said Act makes amendment applicable to taxable years beginning after Dec. 31, 1941. For Sec. 725, I. R. C., before amendment, see 1942 column. See note following Sec. 728, I. R. C., infra. Sec. 726. Corporations completing contracts under Merchant Marine Act, 1936. Sec. 725 (b), I. R. C., See note following Sec. 728, Sec. 726. Corporations completing contracts under Merchant Marine Act, 1936. Sec. 726. (a) If the United States See note following Sec. 728, I. R. C., infra. Sec. 726. Corporations completing contracts under Merchant Marine Act, 1936. Sec. 726. (a) If the United Sec. 726. (a) If the United States States Maritime Commission certi- Maritime Commission certifies to Maritime Commission certifies to the Commissioner that the taxpayer the Commissioner that the taxpayer has completed within the taxable has completed within the taxable year any contracts or subcontracts year any contracts or subcontracts which are subject to the provisions which are subject to the provisions of section 505 (b) of the Merchant of section 505 (b) of the Merchant Marine Act of 1936, as amended, Marine Act of 1936, as amended, then the tax imposed by this sub- then the tax imposed by this subchapter for such taxable year shall chapter for such taxable year shall be, in lieu of a tax computed under section 710, a tax computed under subsection (b) of this section, if, and only if, the tax computed under subsection (b) is less than the tax computed under section 710. fies to the Commissioner that the taxpayer has completed within the taxable year any contracts or subcontracts which are subject to the provisions of section 505 (b) of the Merchant Marine Act of 1936, as amended, then the tax imposed by this subchapter for such taxable year shall be, in lieu of a tax computed under section 710, a tax computed under subsection (b) of this section, if, and only if, the tax computed under subsection (b) is less than the tax computed under section 710. Sec. 726. (b) The tax computed under this subsection shall be the excess of (1) A tentative tax computed under section 710 with the normal-tax net income increased by the amount of any payments made, or to be made, to the United States Maritime Commission with respect to such contracts or subcontracts; over (2) The amount of such payments. See note following Sec. 728, Sec. 727. Exempt corporations. Sec. 726. (b) The tax computed under this subsection shall be the excess of (1) A tentative tax computed un- See note following Sec. 728, Sec. 727. Exempt corporations. be, in lieu of a tax computed under section 710, a tax computed under subsection (b) of this section, if, and only if, the tax computed under subsection (b) is less than the tax computed under section 710. Sec. 726. (b) The tax computed under this subsection shall be the excess of (1) A tentative tax computed under section 710 with the normal-tax net income increased by the amount of any payments made, or to be made, to the United States Maritime Commission with respect to such contracts or subcontracts; over (2) The amount of such payments. See note following Sec. 728, I. R. C., infra. Sec. 727. Exempt corporations. The following corporations, ex- The following corporations shall cept a member of an affiliated cept a member of an affiliated be exempt from the tax imposed by group of corporations filing consol- group of corporations filing consoli- this subchapter: idated returns under section 141, dated returns under section 141, Taxable Years Beginning in 1940 the tax imposed under this subchapter for such taxable year, it shall be exempt from such tax for such year, and the provisions of Supplement S of Chapter 1 shall apply to the shareholders in such corporation who were such shareholders on the last day of such taxable year of the corporation. See note following Sec. 728, I. R. C., infra. Taxable Years Beginning in 1939 Taxable Years Beginning before 1939 Sec. 726. Corporations completing contracts under Merchant Marine Act, 1936. Sec. 726. (a) If the United States Maritime Commission certifies to the Commissioner that the taxpayer has completed within the taxable year any contracts or subcontracts which are subject to the provisions of section 505 (b) of the Merchant Marine Act of 1936, as amended, then the tax imposed by this subchapter for such taxable year shall be, in lieu of a tax computed under section 710, a tax computed under subsection (b) of this section, if, and only if, the tax computed under subsection (b) is less than the tax computed under section 710. |