Parent and Junior Form a Unitary Group of Corporations

question 110

Multiple Choice

Parent and Junior form a unitary group of corporations. Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%. Acting in concert to reduce overall tax liabilities, the group should:

• A) Execute an intercompany loan, such that Junior pays deductible interest to Parent.
• B) Have Parent charge Junior an annual management fee.
• C) Shift Parent's high-cost assembly and distribution operations to Junior.
• D) All of the above are effective income-shifting techniques for a unitary group.
• E) None of the above is an effective income-shifting technique for a unitary group.

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Definitions:

Maturational

Relating to the process of maturation or development, often following a natural progression.

Genetic Blueprint

The set of genes and genetic information in an organism that determines its characteristics and traits.

Maturation

The process of development in which an organism grows or becomes more advanced physically, mentally, or emotionally, often as a function of age.

Premature Birth

The birth of a baby before the completion of the normal gestation period, often defined as before 37 weeks of pregnancy.