Phoenix Corporation Is a Controlled Foreign Corporation (CFC)incorporated in Country

question 15

Multiple Choice

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:

Sales

The total amount of goods or services sold by a company within a specific period.

Manufacturing Costs

Total expenses involved in producing a product or operating a manufacturing business, including materials, labor, and overhead costs.

CCA Class

refers to the categorization of depreciable properties under the Capital Cost Allowance system for tax purposes in Canada, which determines the rate of depreciation.

Net Income

The final amount a company earns after taking out all costs and taxes from its revenue.