In 2017, 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?

Question

Quizplus · Accepted Answer

Since all the widgets are intended for use or consumption within Country X, the income is not considered foreign-based company sales income, and thus no profits are constructively distributed to the U.S. parent company.

In 2017, Phoenix Corporation Is a Controlled Foreign Corporation (CFC)