How much must Wellington, Inc. include in gross income from its 30% ownership of a CFC?

In determining how much Wellington, Inc. must include in its gross income from its 30% ownership of a Controlled Foreign Corporation (CFC), the key concept is that a U.S. shareholder of a CFC is required to include in its gross income its pro-rata share of the CFC's Subpart F income, even if this income is not distributed.

CFCs are generally foreign corporations where U.S. shareholders own more than 50% of the stock, either by vote or value. The 30% ownership suggests that while Wellington, Inc. does have significant ownership, the critical factor is whether it qualifies as a U.S. shareholder for the purposes of Subpart F income. If the CFC has income that exceeds certain thresholds, this income needs to be reported by the U.S. shareholder in its gross income, regardless of whether actual distributions were made.

In this context, the answer of $6 million suggests that this is the pro-rata share of the CFC's Subpart F income that Wellington, Inc. would need to include in its gross income based on its level of ownership and the applicable income generated by the CFC. The figure has been determined from the CFC's overall income, which indicates that this amount