Which of the Following Statements Is True About Applying the Arm's-Length

question 25

Multiple Choice

Which of the following statements is true about applying the arm's-length standard for transfer pricing?

• A) A unique transfer price will be objectively determined using the arm's-length concept.
• B) Since a range of transfer prices would conform to the arm's-length concept, taxpayers can minimize taxes by choosing a transfer price at one end of the range.
• C) The arm's-length concept is accepted worldwide as the optimal transfer pricing model.
• D) Purchasing divisions prefer the arm's-length standard for transfer pricing over alternative methods.

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Definitions:

Retail Outlets

Places where goods and services are sold directly to consumers, ranging from brick-and-mortar stores to online platforms.

Vertical Marketing System

A supply chain in which the members act as a unified system; there are three types.

Formal

Pertains to actions, processes, or appearances that follow established rules, conventions, or procedures, often in professional or official contexts.

Independent

Not influenced or controlled by others; operating freely.