Joanna owns 5% of Axel, a foreign corporation. Joanna's son, Fred, is considering acquiring 15% of Axel from an NRA. The remainder of Axel is owned 27% by unrelated U.S. persons and 53% by unrelated NRAs. Currently, Fred operates (as a sole proprietorship) a manufacturing business that sells goods to Axel for resale outside the United States and outside Axel's country of residence.
Joanna is not concerned about the concentration of investment because she expects to sell her stock in Axel in three years at a significant capital gain. Are there tax issues that Joanna and Fred, both U.S. citizens, need to address? Explain.