What Is a Prime Reason That the IRS Has Found

question 31

Multiple Choice

What is a prime reason that the IRS has found it difficult to obtain information needed to examine the transfer pricing scheme of foreign parents with U.S. subsidiaries?

• A) The information is held by the foreign parent, which is beyond the jurisdiction of the U.S. taxing authority.
• B) Since transfer pricing is not a significant issue to multinational corporations, little information about it exists.
• C) United States does not have tax treaties with the most important countries involved in foreign direct investment in this country.
• D) Computer systems have not been adapted to receive the data from companies in foreign countries.

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Definitions:

Ownership Interest

Refers to the rights and stake a person holds in a particular asset or business, often entailing voting rights and a share in the profits.

Preferred Stock

A class of share ownership in a corporation that has a higher claim on assets and earnings than common stock, often with fixed dividends.

Equity Security

A financial instrument representing ownership interest in a company, such as stocks, which entitles shareholders to vote on corporate matters and receive dividends.

Debt

An amount of money borrowed by one party from another, under the agreement that it will be repaid, often with interest.