## Facts

- A.P. Green Export Co., a domestic corporation and export subsidiary of a U.S. manufacturer, bought fire brick and refractory products in the United States and resold them to customers in Canada and Central and South America.
- The company had no office, plant, or other fixed place of business outside the United States; its operations were conducted domestically.
- Sales contracts generally provided that title and risk of loss remained with the seller until delivery to the foreign customer, with documents of title transferred upon acceptance abroad.
- Transactions were typically priced on CIF terms; the seller arranged freight and insurance, and insurance covered goods in transit and briefly after arrival.
- For 1952 and 1953, the IRS denied the company “western hemisphere trade corporation” status and assessed additional income taxes; the company paid and sued for a refund in the Court of Claims.
- Eligibility depended on whether at least 95% of gross income for the relevant three-year measuring period was from non-U.S. sources and at least 90% was from the active conduct of a trade or business.

## Issues

1. For income-source purposes under § 119(e) of the 1939 Internal Revenue Code, were the company’s sales “made” outside the United States when contracts provided for passage of title upon foreign delivery?
2. Did the company satisfy the “active conduct of a trade or business” requirement for western hemisphere trade corporation status despite having no foreign facilities or foreign investment?

## Decision

- The Court of Claims held the company qualified as a western hemisphere trade corporation under § 109 and was entitled to the § 26(i) credit for 1952 and 1953.
- The court concluded the company’s sales occurred outside the United States under the contracts’ expressed title-passage terms; resulting income was foreign-source for § 109’s 95% test.
- The court further concluded the company’s purchasing, selling, shipping, and insuring activities constituted active conduct of a trade or business for § 109’s 90% test.
- Judgment entered for the taxpayer for a refund of the contested taxes.

## Legal Principles

- Under § 119(e), income from purchasing personal property in the United States and selling it abroad is sourced to the country “in which sold.”
- In determining the place of sale for § 119(e), courts apply a title-passage test; where the contract clearly expresses the parties’ intent as to when and where title passes, that expressed intent governs absent sham.
- A tax-motivated agreement on passage of title does not, by itself, prevent title from passing as the parties agreed.
- Western hemisphere trade corporation status under § 109 does not require foreign plants, branches, or other foreign investment; it turns on the statutory income-source and active-business thresholds and the geographic limitation that the business be conducted in Western Hemisphere countries.
- Committee-report examples are illustrative and do not limit statutory coverage absent clear congressional intent; later congressional statements about earlier enactments are not controlling.

## Conclusion

Because the contracts placed passage of title upon delivery abroad, the taxpayer’s export profits were treated as foreign-source under § 119(e), satisfying the 95% non-U.S.-source requirement, and its export operations constituted active business satisfying the 90% requirement; it therefore qualified for the western hemisphere trade corporation credit and recovered the disputed taxes.


A.P. Green Export Co. v. United States, 284 F.2d 383 (Ct. Cl. 1960)