Rev. Proc. 63-24

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to modify the transition rule set forth in Revenue Procedure 63-2, C.B. 1963-1, 472, for determination of the status of a foreign corporation as a less developed country corporation under section 955(c) of the Internal Revenue Code of 1954.

SEC. 2. BACKGROUND.

Sections 9, 12, and 15 of the Revenue Act of 1962, Public Law 87-834, C.B. 1962-3, 111, provide for the classification of certain foreign corporations as less developed country corporations. In Revenue Procedure 63-2, supra , it is stated that a foreign corporation will be treated as a less developed country corporation for its entire first taxable year beginning after December 31, 1962, if such corporation meets the applicable tests for the period beginning 30 days after the date final regulations under section 955(c) of the Code are published in the Federal Register and ending on the last day of such taxable year. Final regulations under such section were published as Treasury Decision 6683 on October 18, 1963, 28 F.R. 11177, and the period beginning 30 days after such publication will begin November 17, 1963, page 298, this Bulletin. Thus, the qualifying period is very brief for a foreign corporation which uses as its taxable year the calendar year 1963, or a fiscal year ending early in calendar year 1964. The brevity of the qualifying period may give rise to undue hardship for various reasons. The foreign corporation may not have accurate records for such a short period from which to determine whether or not it meets the applicable 80-percent gross income and 80-percent asset tests of section 955(c) of the Code. In addition, the income of the foreign corporation may fluctuate during the taxable year in such a manner as to preclude qualification for the short period.

SEC. 3. CONCLUSION.

In order to avoid undue hardship, a foreign corporation will be treated as a less developed country corporation under section 955(c) of the Code for its first taxable year beginning after December 31, 1962, if it meets any one of the following tests:

(a) Such corporation is engaged in the active conduct of one or more trades or businesses for its entire first taxable year beginning after December 31, 1962, and meets the applicable 80-percent gross income and 80-percent asset tests of section 955(c) of the Code, and the regulations thereunder, for such entire first taxable year;

(b) (i) Such corporation's first taxable year beginning after December 31, 1962, includes November 17, 1963, and

(ii) Such corporation is engaged in the active conduct of one or more trades or businesses for the entire period which begins on November 17, 1963, and ends on the last day of such first taxable year and meets the applicable 80-percent gross income and 80-percent asset tests of section 955(c) of the Code, and the regulations thereunder, for such entire period; or

(c) Such corporation's first taxable year beginning after December 31, 1962, is the calendar year 1963 or a fiscal year ending January 31, February 29, or March 31, 1964, and such corporation-

(i) Is engaged in the active conduct of one or more trades or businesses both for the period which begins on November 17, 1963, and ends on the last day of such first taxable year and also for the entire following taxable year, and

(ii) Meets the applicable 80-percent gross income and 80-percent asset tests of section 955(c) of the Code, and the regulations thereunder, for such entire following taxable year.

¹ Also released as Technical Information Release 519, dated October 16, 1963.