Legal Definitions - CFC

Definition: CFC stands for controlled foreign corporation under CORPORATION.

Example: A US-based company owns a subsidiary in a foreign country. If the subsidiary is considered a CFC, the US company must report its income on their tax return.

Explanation: A CFC is a foreign corporation that is controlled by a US company or individual. The US company or individual must report the CFC's income on their tax return, even if the income is not distributed to them. This is to prevent US taxpayers from avoiding taxes by shifting income to foreign subsidiaries.