TP Exam_21Apr15 (1).pdf - Exam Introduction to Transfer...

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Exam: Introduction to Transfer Pricing Name Instructor Christina Tapia, Ph.D. Date April 21, 2015 Class ECON 423: Topics in Financial Economics Carefully read each question and circle the letter of the correct answer. 1. Which body of law sets forth the transfer pricing regulations involving U.S. firms? a. OECD Guidelines b. United States Tax Reporter c. Internal Revenue Code d. Accounting Standards Codification e. International Financial Reporting Standards 2. According to the U.S. transfer pricing rules, taxable income deemed by the IRS to constitute gross underpayment , which is less than or equal to ______ % of the intercompany transfer price, which results in a penalty of ______ % of the tax attributable to the valuation misstatement. a. 50%, 50% b. 150%, 300% c. 400%, 40% d. 25%, 500% 3. Factors considered to affect the arm’s length nature of prices and profitability include all of the following except: a. Preferences b. Government debt c. Competition d. Risk 4. Which of the following is not an accepted profit level indicator in transfer pricing? a. Gross Cost Plus b. Return on Assets c. Gross Functional Analysis d. Net Cost Plus
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5. Which of the following scenarios does not accurately depict part of Google’s transfer pricing approach in the article titled, Google 2.4% Rate Shows How $60 Billion Lost to Tax Loopholes ? a. Google licenses its intellectual property rights in IP that was developed in the U.S. to foreign subsidiaries and in return, receives arm’s length royalty payments in jurisdictions with lower corporate tax rates b. Google utilizes the “Double Irish” strategy in which two Irish Google subsidiaries pay IP royalties in Ireland and then receive from a lower taxed jurisdiction c. Google minimizes its taxable income through certain royalty exemptions provided to EU-member nations d. Google licenses its intellectual property rights in IP that was developed in the U.S. to foreign subsidiaries and in return, receives arm’s length royalty payments in jurisdictions with higher corporate tax rates 6. A substantial valuation misstatement penalty is characterized by all of the following except for: a. Not tax deductible b. Applied in the year in which the underpayment takes place c. A percentage of underpayment of tax d. Discretionary in the year in which the underpayment takes place 7. Generally, which of the following transfer pricing methods are not recommended for a manufacturer?
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