By Lowell D. Yoder, Esq.
McDermott Will & Emery, Chicago, IL
A recent IRS Chief Counsel Memorandum (CCM)1 adopts a new approach for applying the tax rate disparity test ("TRD test") under the Subpart F branch regulations. While the rationale for the computational approach is understandable, the rule is not obvious from the language in the regulations.
Under the facts, a controlled foreign corporation organized under the laws of Country B ("CFC-B") purchases raw materials from unrelated suppliers and uses them to manufacture a product ("Product X") in Country B. Product X is sold to unrelated customers.