Tiger, Inc., owns 81% of the only class of stock for a CFC named Wolf, Inc....
Tiger, Inc., owns 81% of the only class of stock for a CFC named Wolf, Inc. Wolf, Inc. is based in Germany, and Tiger, Inc. is a US corporation. Both are calendar-year taxpayers and Tiger, Inc. has held stock in Wolf, Inc. since its inception. Wolf, Inc.’s Subpart F income for the current tax year is $1,100,000, the Current E&P is $3,100,000, and no distributions have been made this year.
Calculate the amount of Subpart F income that Tiger, Inc will need to include it its gross income for the year.
Homework Answers
Some of the income earned by a controlled foreign corporation is immediately taxable in the hands of U.S shareholder. It is treated as constructive dividend even without actual distribution to U.S shareholder. Income that is easily shifted to pay less taxes is subject to constructive dividend treatment.
Share of Tiger Inc. in Wolf income for the year = Wolf sub part F income X Shareholding percent = $1,100,000 X 81% = $891,000.
Thus, Tiger will report $891,000 in its gross income.
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Tiger, Inc., owns 81% of the only class of stock for a CFC named
Wolf, Inc....
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