_____ Which of the following statements is false?
A) The Internal Revenue Service would be more inclined to audit intercompany transfers to a foreign country having a lower income tax rate than the U.S. income tax rate versus the opposite situation.
B) A company trying to minimize consolidated income taxes would be inclined to set artificially low transfer prices to countries having a higher income tax rate than that of the United States.
C) For inbound intercompany transfers from foreign parent companies, the Internal Revenue Service requires that transfer pricing records be maintained in the United States or be produced within 60 days if kept abroad.
D) The Internal Revenue Service can assess a nondeductible 20% penalty for transfer pricing adjustments that exceed the lesser of (1) $10 million or (2) 10% of gross receipts for a taxable year-40% if the adjustments exceed $20 million.
E) None of the above.

Question

Quizplus · Accepted Answer

Statement B is false because a company trying to minimize consolidated income taxes would actually be inclined to set artificially high transfer prices to countries having a higher income tax rate than that of the United States, not artificially low. This strategy would allow the company to allocate more income to the jurisdiction with a lower tax rate, thereby reducing the overall tax burden.

_____ Which of the Following Statements Is False