Assignment to be submitted on the final exam day.

In the US there is a different income tax treatment of a CFC and non-CFC. A CFC is a
foreign company that is majority-owned by US shareholders. Which of the following are
CFC and which are not? Why? Explain.
Shareholders

US Shareholder (Mr. Anderson)

Brazil Shareholder (DER Ltd.)
US Shareholder (Coy Ltd.)
US Shareholder (Mr. White)
UK Shareholder (Ms. Black)
US Shareholder (Uni Ltd.)

Percentage of the Voting Stock

Foreign
Foreign
Foreign
Corporation 1
10
30
10
5
15
30
100

Corporation 2
20
20
20
10
20
10
100

Corporation 3
5
20
5
5
15
50
100

What is the importance of knowing a foreign company as a CFC or non-CFC? Explain.

Answer :
1. By analyze the information that shown on the table, based on my opinion Foreign
Corporation 3 is a CFC. Because, on the percentage of voting stock, from 100% or all
the voting stock, 50% is owned by US Shareholder (Uni Ltd.). Its mean that Uni Ltd
put their stock and has its voting almost 50% at the Foreign Corporation 3. Uni Ltd
owned 50% of the stock at the Foreign Corporation 3 to avoid the domestic tax in the
US. By put it as stock in other foreign corporation, the dividend will not be send to
the shareholder. And its automatically avoid shareholder from income tax that will
occurs if they received dividend from other.
And also, in the article that I have read from internet said that foreign company that
categorized as a CFC if mostly 50% or more their stock is owned by US shareholder
(tax payer). Tax payer can be a individual or a company/organization that owned at
least 10% of voting rights.
2. Benefit that we get by knowing a foreign company as a CFC or non-CFC are:

From the investor side, we can avoid the tax domestic that will occurs if we get the
dividend. So to keep save our income that we get from foreign company, we can
invest it as stock in the CFC company.
From the government side, as a institution that make almost of regulation in the
country whether in taxation or others, by knowing which CFC and non CFC the
government can make a regulation that more focus and right on target to avoid the
fraudulent from tax payer.