A controlled foreign corporation (CFC) is incorporated in Country B, and is 100% owned by American Manufacturing Corporation. It purchases raw materials from its U.S. parent corporation, manufactures widgets, and sells 70% of the widgets to unrelated purchasers in Country A and 30% to unrelated purchasers in Country B. All widgets will be used in the countries in which they are purchased. The sales produce $100,000 of taxable income. The foreign- based company sales income reportable by American Manufacturing Corporation under the Subpart F rules is

Question

Quizplus · Accepted Answer

Under Subpart F rules, foreign base company sales income is generally income from the sale of personal property where the property is both manufactured and sold for use outside the CFC's country of incorporation. Since the widgets are sold for use in the countries where they are purchased, none of the income is considered foreign base company sales income.

A Controlled Foreign Corporation (CFC) Is Incorporated in Country B