The following persons own Schlecht Corporation, a foreign corporation. None of the shareholders are related.Subpart F income for the tax year is $300,000.No distributions are made.Which of the following statements is correct?

Question

The following persons own Schlecht Corporation, a foreign corporation.  None of the shareholders are related.Subpart F income for the tax year is $300,000.No distributions are made.Which of the following statements is correct?

Quizplus · Accepted Answer

Since none of the shareholders are related and no one person owns more than 50% of the corporation, it cannot be a controlled foreign corporation (CFC). Therefore, option A is incorrect. Chee is not a U.S. shareholder, so he is not subject to Subpart F income inclusion. Therefore, option B is incorrect. Marina may or may not be a U.S. shareholder, but since there are no distributions made during the tax year, she does not have any income inclusion. Therefore, option D is incorrect. Option C is correct because Marina is not a U.S. shareholder and there are no distributions, so she does not have any Subpart F income inclusion.

The Following Persons Own Schlecht Corporation, a Foreign Corporation