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Exam 9: International Transfer Pricing

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Question 21

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What is a prime reason that the IRS has found it difficult to obtain information needed to examine the transfer pricing scheme of foreign parents with U.S. subsidiaries?

A) The information is held by the foreign parent, which is beyond the jurisdiction of the U.S. taxing authority.
B) Since transfer pricing is not a significant issue to multinational corporations, little information about it exists.
C) United States does not have tax treaties with the most important countries involved in foreign direct investment in this country.
D) Computer systems have not been adapted to receive the data from companies in foreign countries.

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Question 22

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The comparable uncontrolled transaction (CUT) method is one alternative for determining an arm's-length transfer price for what kind of intercompany transaction?

A) Interest on intercompany loans
B) Sale of tangible property
C) Licenses of intangible property
D) Intercompany services

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Question 23

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Which is NOT a common risk associated with local authorities' scrutiny of a company's transfer prices?

Subsidiary X, located in a country with a 25% corporate income tax rate, and Subsidiary Y, located in a country with a 35% corporate income tax rate are part of a decentralized organization. They have been engaged in trade with one another using a negotiated transfer price of $50 per unit for sales by Subsidiary X to Subsidiary Y. Pipko, the parent company of both Subsidiary X and Subsidiary Y recently set a discretionary transfer price of $80 per unit for the transfers between X and Y. What is advantage of this decision?

Which of the following statements is true about applying the arm's-length standard for transfer pricing?

Subsidiary X, located in a country with a 25% corporate income tax rate, and Subsidiary Y, located in a country with a 35% corporate income tax rate are part of a decentralized organization. They have been engaged in trade with one another using a negotiated transfer price of $50 per unit for sales by Subsidiary X to Subsidiary Y. Pipko, the parent company of both Subsidiary X and Subsidiary Y recently set a discretionary transfer price of $80 per unit for the transfers between X and Y. How will subsidiary managers in the decentralized organization view this decision by parent company management?

According to Internal Revenue Service (IRS) code Section 482, what is the standard used by the IRS for international transfer pricing?

In a recent survey, what issue did 30% of respondents identify as the most important international tax issue they face?

A cost-plus transfer pricing scheme is allowed by the Internal Revenue Service when:

What is the term used for intercompany transactions from a subsidiary to a parent?

What is the term used for intercompany transactions from a parent to a subsidiary?

What is the time frame in which taxpayers must produce documentation to the IRS, in which it justifies the transfer pricing method that it has selected as being the most reliable measure of arm's-length price?

How is goal congruence achieved in decentralized organizations?

IRS code Section 482 describes appropriate transfer prices as "the prices which would have been agreed upon between unrelated parties engaged in the same or similar transactions under the same or similar conditions in the open market." How does it refer to such prices?

Which of the following is a reason for a parent to use discretionary transfer prices?

What is the primary characteristic of a decentralized organization?

What is the general rule for international transfer pricing advocated by the Organization for Economic Cooperation and Development (OECD) ?

Historically, which industry is found most at risk for a transfer pricing adjustment?

In addition to regulating the transfer prices on tangible property, the Internal Revenue Service also provides guidance on:

What is the primary difficulty of using market-based transfer prices for intercompany transactions?