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

question 26

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-base company sales income to the U.S.parent company?

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

---

Definitions:

Accounting Equation

The basic principle that equates assets with the sum of liabilities and shareholders' equity, formulated as Assets = Liabilities + Equity.

Liabilities

Financial obligations or debts that an entity owes to external parties, which must be settled over time through the transfer of economic benefits.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing owners' claims on the company's resources.

Increase Assets

The process by which a company's resources, valuable to its operations and financial growth, are augmented or enlarged.