A Foreign Corporation Is Owned by Five Unrelated Individuals

question 64

Multiple Choice

A foreign corporation is owned by five unrelated individuals. John, Sam, and David are U.S. citizens who own 30%, 18% and 9%, respectively, of the foreign corporation's single class of stock. Alberto and Manuel are nonresident aliens who own 37% and 6%, respectively, of the foreign corporation's stock. Which of the following statements is true?

• A) There are two "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CFC).
• B) There are three "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CFC).
• C) There are two "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CFC).
• D) There are three "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CFC).

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Definitions:

Rate of Return on Investment

A measure of the profitability or efficiency of an investment, calculated as the ratio of net profits to the initial cost of the investment.

Balance Sheet

A report that outlines the financial standings of a company, including assets, obligations, and owners' equity, at a given time.

Income Statement

A financial statement that shows a company's revenues and expenses over a specified period, culminating in net income or loss.

Owners' Equity

The residual interest in the assets of an entity after deducting liabilities, essentially representing the owners' claim against the company's assets.