Abe,a U.S.shareholder under the CFC provisions,owns 49% of a CFC.If the CFC's Subpart F income for the taxable year is $200,000,Abe is not taxed on receipt of a constructive dividend of $98,000 because he doesn't own more than 50% of the CFC.

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Under the CFC provisions, if a U.S. shareholder owns at least 50% of a CFC, they are subject to taxation on their share of the CFC's Subpart F income, which includes certain types of income earned by the CFC. In this scenario, Abe owns 49% of the CFC and therefore is not subject to taxation on his share of the Subpart F income. However, if he were to receive a constructive dividend of $98,000, this would be subject to taxation as ordinary income regardless of his ownership percentage.

Abe,a USShareholder Under the CFC Provisions,owns 49% of a CFC