Question

Zeus S.A. is a Swiss corporation that has 1,000 shares of a single class of stock outstanding, of which 460 shares are owned by Jupiter Corp., a widely held U.S. corporation, and the remaining 540 shares are owned in equal amounts (i.e., 90 shares each) by 6 individuals who are U.S. citizens and who are not related to one another by family or business relationships.

(a) Is Zeus a controlled foreign corporation?

(b) If the facts are the same as in part (a), but the number of individual shareholders is reduced from 6 to 5 (owning 108 shares each), is Zeus a controlled foreign corporation?

(c) The facts are the same in part (a), except that one of the shareholders of Zeus is not an individual but a U.S. investment partnership which owns 90 shares of Zeus directly. One of the individuals who owns 90 shares of Zeus directly also owns a 5% interest in the profits and capital of the partnership. Is Zeus a controlled foreign corporation?

(d) If the facts are the same as in part (a), except that two of the individuals are husband and wife, is Zeus a controlled foreign corporation?

(e) Would the result change in part (d) if the wife is a nonresident alien?

(f) If the facts are the same as in part (a), except that two of the individuals are brother and sister, is Zeus a controlled foreign corporation?

(g) If the facts are the same as in part (a), except that one of the individuals also owns 50% of the stock of Jupiter Corp., is Zeus a controlled foreign corporation?

(h) Would the result change in part (g) if that individual owns 10% of the Jupiter Corp. stock?

(i) Would the result change in part (g) if that individual owns 5% of the Jupiter Corp. stock?

(j) The facts are the same as in part (a), except that of the 1,000 shares of Zeus stock outstanding, 410 shares are owned by Jupiter Corp. and 90 shares are owned by a U.S. citizen who also owns 3% of the shares of Juno B.V., a Dutch corporation that owns 500 Zeus shares. Is Zeus a controlled foreign corporation?

Answer 1