If the Portions of the Firm's Foreign Operations in Higher-Tax-Rate

question 52

Multiple Choice

If the portions of the firm's foreign operations in higher-tax-rate countries grew more rapidly than foreign operations in lower-tax-rate countries,the company may seek out more tax effective ways of operating abroad through all of the following means except:

• A) Assess whether transfer prices or cost allocations can be adjusted to shift income
• From high-tax-rate to low-tax-rate jurisdictions.
• B) Shift from domestic to foreign borrowing to increase deductions for interest against
• Foreign-source income.
• C) Shift from debt to equity financing of foreign operations to increase interest deductions
• Against foreign-source income.
• D) Shift some operations, like marketing, to the United States where the average tax rate is lower.

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Definitions:

Big Picture

An overview or broad perspective of a situation or concept, emphasizing the overall scenario rather than specific details.

Economizing Problem

The issue of limited resources to meet unlimited wants, necessitating choices and prioritizations in the use of resources.

Limited Resources

The finite availability of inputs or resources (labor, capital, land) that can be used for the production of goods and services.

Unlimited Wants

The economic concept that human desires and needs are constant and infinite, whereas the resources to fulfill them are limited.