Pratt Company Structured an Income-Generating Transaction So That the $750,000

question 11

Multiple Choice

Pratt Company structured an income-generating transaction so that the $750,000 income and cash flow shifted to Pratt's wholly owned subsidiary, PTB Company. If Pratt's marginal tax rate is 21%, and PTB's tax rate is 10%, compute the tax savings from the income shift.

• A) $157,500
• B) $75,000
• C) $82,500
• D) $78,750

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Definitions:

Triglycerides

Simple lipids consisting of glycerol (an alcohol) and three fatty acids.

Lipids

Organic compounds that are fatty acids or their derivatives and are insoluble in water but soluble in organic solvents.

Organic Substances

Compounds containing carbon and typically derived from living organisms, essential to biological processes.

Vitamins

Vitamins are organic compounds that are essential in small amounts for supporting normal physiological function.