If an MNC's Home Country Allows It to Deduct from Its

question 26

Multiple Choice

If an MNC's home country allows it to deduct from its taxable income the income tax paid by its foreign subsidiary:

• A)the MNC receives full credit for the foreign income tax paid by the subsidiary,and the effects of double taxation are eliminated.
• B)whether the MNC receives any relief from double taxation depends on the relative tax rates between the MNC's home country and the foreign country where the subsidiary operates.
• C)the MNC pays domestic income taxes on its income and on its subsidiary's after-tax income,and the effects of double taxation are reduced.
• D)the foreign subsidiary is relieved of an income tax burden,and the MNC will receive a large remittance of profits from its subsidiary.

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Definitions:

Maturity Date

The specific date on which a financial instrument (like a bond or loan) becomes due for payment of principal and interest.

Installment Accounts

Installment accounts are credit accounts where the borrower repays the loan amount plus interest in regular payments over a set period.

Allowance Method

The allowance method is an accounting technique used to account for bad debts by estimating uncollectible accounts and reflecting them as an allowance for doubtful accounts on the balance sheet.