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

question 78

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 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- base 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:

Capital Investment Project

A project undertaken by a business to acquire or upgrade physical assets such as property, industrial buildings, or equipment to create future benefits.

Break-Even Time

The period it takes for a business or project to generate enough revenue to cover its initial investment and start making a profit.

Cash Inflows

The movement of money into a business or account, typically from operating activities, financing, and investing.

Discount Rate

The interest rate used to discount future cash flows to their present values in various financial models.