In 2017, Phoenix Corporation Is a Controlled Foreign Corporation (CFC)

question 22

Multiple Choice

In 2017, Phoenix Corporation is a controlled foreign corporation (CFC) incorporated in Country X. It is 100% owned by its U.S parent corporation. Phoenix has $80,000 of taxable income from the sale of widgets that were purchased from their U.S. parent corporation. All widgets have the same gross profit. Sixty percent of the widgets were sold through a Country Y wholesaler that is 100% owned by Phoenix, and are destined for use in Country Y. The remaining 40% are sold through unrelated Country X wholesalers and are destined for use in Country X. What amount of profits will be constructively distributed as foreign- based company sales income to the U.S. parent company?

• A) $0
• B) $32,000
• C) $80,000
• D) $48,000

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Definitions:

Captured Agency

A situation where a regulatory agency is dominated by the interests of the industry it is supposed to regulate.

Agency Officials

Individuals who hold positions of authority within governmental or organizational bodies, responsible for implementing policies and making decisions.

Unduly Influenced

Pertains to decision-making that is excessively controlled or affected by another, often in a manner that questions the fairness or voluntariness of the decision.

Federal Independent Agency

An agency of the federal government that operates independently of the executive departments, often with regulatory or oversight responsibilities.