Foreign use—foreign parent cor- poration Clause Samples
The 'Foreign use—foreign parent corporation' clause defines how intellectual property or other rights granted under an agreement may be used by a parent corporation located outside the country of the contracting party. Typically, this clause clarifies whether a foreign parent company of a licensee or subsidiary is permitted to use the licensed technology, trademarks, or other assets, and under what conditions such use is allowed. By specifying these terms, the clause helps prevent unauthorized or unintended use of rights across international corporate structures, ensuring that the scope of permitted use is clear and enforceable.
Foreign use—foreign parent cor- poration. (i) Facts. F1 and F2, nonresident alien individuals, each owns 50 percent of FPX, a Country X entity that is subject to Country X tax on its worldwide income. FPX is classified as a foreign corporation for U.S. tax purposes. FPX owns DRCX. DRCX is the parent of a consolidated group that includes as a member DS, a domestic corporation. In year 1, DRCX incurs a dual consolidated loss of $100x and, for Country X tax purposes, FPX generates $100x of income. In year 1, FPX elects to consolidate with DRCX for Country X tax purposes, and the $100x year 1 loss of DRCX is used to offset the income of FPX under the laws of Country X. For U.S. tax purposes, the items of FPX do not constitute items of income in year 1.