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.

---

Definitions:

Townshend Acts

A series of British laws passed in 1767 imposing taxes on the American colonies for goods such as paper, tea, glass, and paint, which stirred resistance and controversy.

Thomas Hutchinson

A British government official and historian, he was a leading figure in Massachusetts during the colonial period, known for his pro-British stances leading up to the American Revolution.

Economic Possession

Refers to the ownership or control over assets and resources that have economic value, including land, capital, and commodities.

Confederation of Equals

A theoretical or ideal organization or alliance where all members or parties have equal status and power.