A CFC (incorporated in New Zealand) has two shareholders, Jan, a US individual, and BIG Inc., a

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Question:

A CFC (incorporated in New Zealand) has two shareholders, Jan, a US individual, and BIG Inc., a US corporation (both own 50% vote and value). In the current year, the CFC has $12,000,000 of non-Subpart F income on which it paid $1,200,000 of New Zealand income taxes. The CFC has $1,000,000 of average tangible assets in New Zealand and paid no dividends to its shareholders in the current year.

a. How much US tax will Jan and BIG Inc. each owe in the current year as a result of owning this CFC?

b. Would your answer change if the New Zealand CFC elects to be treated as a partnership for US tax purposes? If so, please explain and provide support.