Inter Corp, an Industrial corporation, has 100 shares of one class of stock outstanding which is owned by the following shareholders: 40 shares by US Co Inc., a publicly held US corporation, 20 shares by Sam, a US citizen who resides in Venezuela, 15 shares by Angelina, a citizen and resident of Industrial, 4 shares by Fred, a US citizen residing in the US, 6 shares by Alex, Fred's brother who is also a US citizen residing in the US, 14 shares by Michael, a Spanish citizen who has a US green card, and 1 share by James, a Jamaican citizen who spends 200 days a year in the US.

 

During 2014, Inter Corp has $10 million of income having the following character: $4 million in foreign source dividends and interest from unrelated person, $1 million in income from an active foreign business which constitutes foreign base company sales income, and $5 million in income from an active foreign business which does not constitute foreign base company sales income.  Inter Corp has no deductions in 2003.

 

During 2014, Inter Corp's assets consist of the following:

Assets that are used to conduct its trade or business activities which have an average value of $50 million and average adjusted bases of $25 million, and

Assets producing passive income or held for the production of passive income which have an average value of $60 million and average adjusted bases of $35 million.

 

Is Inter Corp a CFC in 2014?  Why or why not?

 

Is Inter Corp a PFIC in 2014?  Why or why not?

 

Do any of Inter Corp's shareholders receive deemed dividends from Inter Corp?  If so, which shareholders and how much does each receive?

 

Would you advise any of the shareholders to make a QEF election?  If so which ones?  What would be the effect of a QEF election?

Answer rating: 100% (QA)

1 Yes The IRC 957 defines a CFC as a controlled foreign corporation in which more than 50 of the tot... View the full answer