Parent and Junior Form a Unitary Group of Corporations

question 24

Multiple Choice

Parent and Junior form a unitary group of corporations. Parent is located in a state with an effective tax rate of 3% and 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) Do all of these.
• E) Do none of these.

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Definitions:

Discriminant Validity

A property demonstrating that a test or scale that is not closely related to variables from which it is theoretically distinct.

Construct Validity

The degree to which a test or instrument accurately measures the theoretical construct or psychological concept it intends to.

Content Validity

The degree to which a test or instrument covers the representative breadth of the topic or construct it is intended to measure.

Construct Validity

The degree to which a test measures what it claims to be measuring, indicating the test's accuracy in assessing theoretical constructs.