Which of the Following Statements Is True with Regard to Intercompany

question 98

Multiple Choice

Which of the following statements is true with regard to intercompany transactions?

• A)An intercompany transaction is eliminated from consolidated taxable income.
• B)All intercompany gains are recognized, but losses must be deferred.
• C)A cash sale of a business asset by the purchasing member to an acquirer outside of the group triggers immediate recognition of the gain or loss.
• D)The gain or loss on an intercompany transaction is deferred for up to ten years, after which it is recognized.

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Definitions:

Dividend Income

Income received from owning shares of a company that pays dividends, representing a portion of the company's profits distributed to shareholders.

Growth Rate

The rate at which a company's sales, earnings, dividends, or other key metrics increase over a specified period of time.

Transaction Costs

Expenses incurred when buying or selling securities, including broker's fees, commissions, and taxes, which can affect the overall profitability of an investment.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares, though the market capitalization remains the same.