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

question 55

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 are intended for use or consumption within Country X and have the same gross profit. Sixty percent of the widgets were sold through a Country X wholesaler that is 100% owned by Phoenix, and 40% are sold through unrelated Country X wholesalers. 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)$48,000
• D)$80,000

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Definitions:

Tax Losses

A financial situation where the expenses and deductions are greater than the income generated, potentially reducing taxable income in future periods.

Share Capital

The funds raised by a company through the issuance of shares, representing the amount invested by shareholders.

Exchange of Shares

A transaction where shares of one company are exchanged for shares of another company, often occurring in mergers and acquisitions.

Business Combinations

The process of uniting two or more companies into a single corporate entity, often involving acquisitions or mergers.