Which of the Following Tax or Non-Tax Benefits Does Not

question 48

Multiple Choice

Which of the following tax or non-tax benefits does not arise when a U.S. corporation forms a hybrid entity in Germany through which to earn business profits in Germany and elects to have the entity treated as a branch for U.S. tax purposes?

• A) Potential exemption of U.S. tax on income earned by the corporation.
• B) Flow-through of losses from the German corporation to the tax return of the U.S. corporation.
• C) Limited liability to the U.S. corporation for acts committed by the hybrid entity.
• D) Free transferability of the stock of the hybrid entity by the U.S. corporation.

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units.

Profitable

A financial status where the income or revenue generated exceeds the costs or expenses, resulting in a financial gain.

Natural Monopoly

A market where a single supplier can produce output at a lower cost than multiple competitors, often due to economies of scale.

Increasing Returns

A situation where the input in a production process is increased and the output increases at a proportionally higher rate.