Question: During the current year, Sanders, a U.S. corporation, organized a foreign subsidiary in Country Z. The subsidiary purchases components from Sanders, assembles them into finished

During the current year, Sanders, a U.S. corporation, organized a foreign subsidiary in Country Z. The subsidiary purchases components from Sanders, assembles them into finished products using Country Z labor, and sells the products to unrelated wholesalers in Countries X, Y, and Z through its own sales force. Assembly costs are 25% of the wholesale price. The foreign subsidiary has paid Sanders (its parent) no dividends this year. What tax issues regarding these activities should Sanders' director of taxes consider?

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