A Transfer Pricing Policy Based on Market Price

question 51

Multiple Choice

A transfer pricing policy based on market price:

• A) Maximizes total organizational profit
• B) Is best because the market price is always objective and easily obtainable
• C) May result in suboptimal decision-making for the company as a whole
• D) Is the only alternative accepted by the Canada Revenue Agency

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Definitions:

Passive Activities

Economic engagements, such as rental activities or businesses in which the taxpayer does not actively participate, often with specific tax rules.

Passive Losses

Losses incurred from business activities in which the taxpayer does not materially participate, often from real estate.

Partnership

A legal arrangement in which two or more people share ownership of a business, including its profits, losses, and responsibilities.

Tax Preference Items

Items or income types that receive preferential tax treatment, often reducing the tax liability for an individual or entity.