A U.S.-based multinational parent corporation owns 75 percent of a Mexican corporation.The Mexican corporation owns 100 percent of a Panamanian company.Panama is a tax-haven country.The Panamanian company is a controlled foreign corporation (CFC) and all of its $250,000 income is Subpart F income.If none of the companies paid dividends, how much dividend income must the U.S.-based parent recognize?

Question

Quizplus · Accepted Answer

Since the Panamanian company is a CFC and all its income is Subpart F income, the U.S.-based parent corporation must include the income in its taxable income. Therefore, the parent corporation must recognize 75% of the $250,000 income, which is $187,500 as dividend income.

A US-Based Multinational Parent Corporation Owns 75 Percent of a Mexican