Consider whether income earned by Matterhorn, S. A. (“Matterhorn”), a Swiss corporation, of which 100% of the total combined voting power of all classes of stock is owned by USM Corp. (“USM”), a U.S. corporation, would constitute “foreign base company income” under the following circumstances:

(a) Matterhorn acquires by license from USM rights to all European patents owned by the latter. Matterhorn sublicenses these patents in return for royalties to 12 independent licensees in countries outside Switzerland.

(b) Would the results change in part (a) if the patents were acquired originally by Matterhorn covering inventions developed by its own technicians?

(c) Matterhorn receives $200,000 of dividends and $100,000 of interest from each of two wholly-owned subsidiaries, which are organized under the laws of, and have all of their assets and operations in, Belgium and Switzerland, respectively. Of the gross income of the Belgian subsidiary for the tax year, $800,000 consists of income from the manufacture and sale of machine tools in Belgium and $200,000 consists of passive interest income. Of the gross income of the Swiss subsidiary, $600,000 consists of income from the manufacture and sale of electronic instruments in Switzerland, and $400,000 consists of interest income that is foreign personal holding company income.

(d) Matterhorn sells gold coins of numismatic value at again to an independent dealer in Switzerland. The coins were purchased by Matterhorn in Antwerp, Belgium, 10 years before as an investment.

(e) Matterhorn sells at a gain all rights to a group of Swiss patents (purchased from USM 3 years ago) to Eiger, S.A., a Swiss corporation, which is engaged in the manufacture and sale of consumer products in Switzerland, which is also a wholly-owned subsidiary of Matterhorn and which had previously paid royalties to Matterhorn for the use of these patents.

(f) Matterhorn purchases from USM golf balls manufactured by USM in the United States. Matterhorn packages them and sells them to independent distributors outside of Switzerland.

(g) Would it make a difference in part (f) if Matterhorn sold only to independent distributors in Switzerland?

(h) Would it make a difference in part (f) if Matterhorn bought the golf balls from an independent U.S. manufacturer (instead of USM)?