Pogo, Inc., which has a 34 percent marginal tax rate, owns 50 percent of the stock of a CFC. At the beginning of the year, Pogo's basis in the CFC stock was $2 million. The CFC's current year earnings were $750,000 of which $600,000 was subpart F income and zero was global intangible low-taxed income. The CFC paid no foreign income tax and distributed no dividends.
a. Explain Pogo's U.S. tax consequences with respect to its investment in the CFC.
b. Compute Pogo's basis in its CFC stock at the end of the year.

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The Answer of Pogo, Inc., which has a 34 percent marginal tax rate, owns 50 percent of the stock of a CFC. At the beginning of the year, Pogo's basis in the CFC stock was $2 million. The CFC's current year earnings were $750,000 of which $600,000 was subpart F income and zero was global intangible low-taxed income. The CFC paid no foreign income tax and distributed no dividends.
a. Explain Pogo's U.S. tax consequences with respect to its investment in the CFC.
b. Compute Pogo's basis in its CFC stock at the end of the year.

Pogo, Inc, Which Has a 34 Percent Marginal Tax Rate, Owns