Which of the Following Is True of Profit Split Method

question 2

Multiple Choice

Which of the following is true of profit split method?

• A) It is based on the assumption that similarly situated taxpayers will tend to earn similar returns over a given period.
• B) Under this method, an arm's-length price is determined by referring to an objective measure of profitability earned by uncontrolled taxpayers on comparable, uncontrolled sales.
• C) This method assumes that the buyer and seller are one economic unit.
• D) This method is normally used in cases involving manufacturing, assembly, or other production of goods that are sold to related parties.

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Definitions:

Cylindricity

A three-dimensional geometric tolerance that specifies how much a cylindrical feature's actual profile can deviate from a perfect cylinder.

Circularity

Circularity is a geometric tolerance that specifies how much a feature's shape can deviate from a perfect circle.

Parallelism

A geometric condition where surfaces or lines are equidistant at every point, typically referenced in engineering to describe alignment accuracy.

Concentricity

The characteristic of two or more forms sharing a common center, axis, or curve, often critical for mechanical parts that rotate.