What Is the Advantage of an Advance Pricing Agreement

question 12

Multiple Choice

What is the advantage of an advance pricing agreement?

• A) IRS (Internal Revenue Service) will not challenge the transfer price after the tax return is filed if the agreement is followed.
• B) Worldwide taxes will be minimized.
• C) The brief form explaining the transfer price to be used can be completed with minimal effort by the taxpayer but will reduce a tremendous amount of work later.
• D) All of the above are advantages of APA.

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Definitions:

Written Instrument

A legal document delineating rights, duties, or liabilities, often used in financial and property transactions.

Formal

Pertains to actions, processes, or documents that are done in accordance with established or conventional rules.

Note Receivable

A financial asset representing a written promise to receive a specific sum of money at a future date.

Other Receivables

Financial claims against entities other than customers, which might include tax refunds, interest due, and insurance claims.