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-base company sales income reportable by American Manufacturing Corporation under the Subpart F rules is
A)$0.
B)$30,000.
C)$70,000.
D)$100,000.

Question

Quizplus · Accepted Answer

Under Subpart F rules, foreign-base company sales income includes income from selling goods to related parties for use outside the CFC's country of incorporation. Since all sales are to unrelated parties and the widgets are used in the countries where they are sold, there is no foreign-base company sales income to report.

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