Parent and Junior Form a Unitary Group of Corporations

question 110

Multiple Choice

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

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

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Definitions:

Overall Service

A general term that could refer to the comprehensive quality and efficiency of service provided by a business or organization to its customers.

Pie Chart

A circular chart divided into sectors, each representing a proportion of the whole.

Proportion

The fraction or percentage of a total that is accounted for by a specific group, characteristic, or outcome.

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Individuals who have completed a degree program at a business school, typically specializing in business administration or management.