Prior to 2018, domestic corporation X owns all the stock of controlled foreign corporation (CFC) T. X's acquisition cost for the CFC investment is $150,000. The CFC reports E&P of $200,000 since the domestic corporation acquired its interest, of which $120,000 was Subpart F income. The CFC makes a cash distribution of $90,000 to the domestic corporation. What is the domestic corporation's basis for its investment in T immediately after the cash distribution?

Question

Quizplus · Accepted Answer

The basis of the domestic corporation's investment in the CFC is increased by the E&P ($200,000) and decreased by the cash distribution ($90,000), resulting in a new basis of $180,000.

Prior to 2018, Domestic Corporation X Owns All the Stock