China Trade Act Corporation

Summary of China Trade Act Corporation

A corporation formed under the China Trade Act of 1922, which provided special tax incentives to firms engaged in trade with China. Following the collapse of the Nationalist government on mainland China in 1949, the act was amended to cover only Taiwan and Hong Kong. In its final form, the act provided for a deduction for U.S. income tax purposes computed by deriving a fraction for the par values of shares of the corporation held by persons resident in Taiwan, Hong Kong, and the United States and its possessions versus the whole number of shares outstanding. The fraction so derived would be applied to the proportional part of the corporation's income earned in Taiwan and Hong Kong.

For taxable years beginning in 1976, the deduction was reduced by one-third; commencing in 1977, the deduction was reduced by two-thirds. The deduction was eliminated entirely effective January 1, 1978, pursuant to P.L. 94-455, Section 1053 (c).

(Main Author: William J. Miller)