Groucho, Harpo, Chico and Zeppo Marx are brothers who are US citizens. Groucho,
ID: 2477547 • Letter: G
Question
Groucho, Harpo, Chico and Zeppo Marx are brothers who are US citizens. Groucho, Harpo and Chico each own 15% of the stock of Duck Soup Limited, a Fredonia (foreign) corporation. Zeppo owns 7% and unrelated Fredonians hold the remaining shares. Which of the following is most correct as to Duck Soup's status as a controlled foreign corporation under Sections 957 and 958?
(a) Duck soup is a CFC because U.S. persons own more than 50% of the vote and value of the corporation
(b) Duck soup is a CFC because US shareholders own more than 50% of the vote or value of the corporation.
(c) Duck soup is not a CFC because US shareholders do not own more than 50% of the vote or value of the corporation
(d) Duck soup is not a CFC because Fredonia does not have diplomatic relations with the US
Explanation / Answer
the following is most correct as to Duck Soup's status as a controlled foreign corporation under Sections 957 and 958:
(c) Duck soup is not a CFC because US shareholders do not own more than 50% of the vote or value of the corporation
=> constructive ownership under IRC Sections 957 & 958(b)), that there are, in the aggregate, U.S. shareholders who own more than 50 percent, by vote or value, in the foreign corporation, it is classified as a controlled foreign corporation (CFC).
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