### Question
How does Tax Based on Income From Sources Within or Without the United States define active foreign business income” means gross income which—


(i) is derived from sources outside the United States (as determined under this subchapter) or, in the case of a corporation, is attributable to income so derived by a subsidiary of such corporation, and


(ii) is attributable to the active conduct of a trade or business in a foreign country or possession of the United States by the individual or corporation (or by a subsidiary.)


  

For purposes of this subparagraph, the term “subsidiary?


### Answer
Under *26 U.S.C. § 861*, **active foreign business income” means gross income which—


(i) is derived from sources outside the United States (as determined under this subchapter) or, in the case of a corporation, is attributable to income so derived by a subsidiary of such corporation, and


(ii) is attributable to the active conduct of a trade or business in a foreign country or possession of the United States by the individual or corporation (or by a subsidiary.)


  

For purposes of this subparagraph, the term “subsidiary** is defined as:

> any corporation in which the corporation referred to in this subparagraph owns (directly or indirectly) stock meeting the requirements of section 1504(a)(2) (determined by substituting “50 percent” for “80 percent” each place it appears)

#### Citation:
  - *26 U.S.C. § 861*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter N-Tax Based on Income From Sources Within or Without the United States > PART I-SOURCE RULES AND OTHER GENERAL RULES RELATING TO FOREIGN INCOME**

