Ames, Inc., a U.S. corporation, owns 100% of Boone, Ltd., a United Kingdom corporation. Boone purchases finished inventory from Ames and sells the inventory to customers in the U.K. and Germany. During the current year, Ames earned $600,000 in profits from sales to U.K. customers and $400,000 in profits from sales to German customers. Boone operates a sales office in London with 12 full-time employees.
How much of Boone’s $1 million in profits will be characterized as Subpart F income?
Is a foreign corporation owned equally by 100 unrelated U.S. citizens considered a controlled foreign corporation?
Discuss the policy reasons for the existence of the Subpart F rules. Give two examples of Subpart F income.
Evaluate this statement: It is unfair that the United States taxes its citizens and residents on their worldwide income.
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