How is it possible for a U.S. firm to have an effective tax rate that is less than the U.S. federal statutory tax rate?
A) The firm has expenses that are not deductible for tax purposes.
B) Tax rates in foreign countries where the firm operates are higher.
C) Tax rates in foreign countries where the firm operates are lower.
D) It is not possible for a firm to have an effective tax rate different from the U.S. federal statutory tax rate.

Question

Quizplus · Accepted Answer

A U.S. firm may have operations in foreign countries with lower tax rates, which would reduce its overall effective tax rate below the U.S. federal statutory tax rate. The firm can shift profits to those countries through various tax planning strategies such as transfer pricing arrangements, intellectual property licensing, or financing structures to take advantage of lower tax rates.

How Is It Possible for a U