Final answer:
A shareholder must own 10% or more of the stock to be for controlled foreign corporation (CFC) definition purposes. The threshold is significant for tax reporting under United States law regarding CFCs.
Step-by-step explanation:
A shareholder for controlled foreign corporation (CFC) definition purposes must own 10% or more of the stock. The correct answer to the student's question is option a. 10%.
In the context of CFCs, the Internal Revenue Code typically defines a United States shareholder as a U.S. person (individual, partnership, corporation, or trust) who owns 10% or more of the total combined voting power of all classes of voting stock of a foreign corporation, or 10% or more of the total value of shares of all classes of stock of a foreign corporation.
Understanding the threshold for CFCs is crucial for those involved in international business and taxation, as it can have significant implications for income reporting and taxes due under United States tax law, particularly the rules regarding Subpart F income of the controlled foreign corporation.