Parent and Minor Form a Non-Unitary Group of Corporations

question 201

Multiple Choice

Parent and Minor form a non-unitary group of corporations. Parent is located in a state with an effective tax rate of 3%, while Minor's effective tax rate is 9%. Acting in concert to reduce overall tax liabilities, the group should:

• A) Have Parent charge Minor an annual management fee.
• B) Shift Parent's high-cost assembly and distribution operations to Minor.
• C) Execute an intercompany loan, such that Minor pays deductible interest to Parent.
• D) All of the above are effective income-shifting techniques for a non-unitary group.
• E) None of the above is an effective income-shifting technique for a non-unitary group.

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Definitions:

Crowd Action

Collective behavior by people gathered in a public space, often spontaneous and motivated by a common goal or grievance.

Tea Act

A 1773 act by the British Parliament granting the East India Company the right to sell tea to the American colonies free of the taxes that colonial tea sellers had to pay, leading to the Boston Tea Party.

Boston Tea Party

A protest by American colonists in 1773 against British taxation, in which they boarded British ships and dumped tea into Boston Harbor.

Patriot Behavior

The actions and attitudes of individuals who intensely support and defend their country, often associated with the American Revolutionaries who fought for independence from Britain.