QUESTION 32 Tio, Inc. a U.S. parent owns two subsidiaries, Ecuador Inc. and Taiwan Inc. The corporate tax rate is 20% in

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Question 32 Tio Inc A U S Parent Owns Two Subsidiaries Ecuador Inc And Taiwan Inc The Corporate Tax Rate Is 20 In 1 (84.25 KiB) Viewed 61 times

QUESTION 32 Tio, Inc. a U.S. parent owns two subsidiaries, Ecuador Inc. and Taiwan Inc. The corporate tax rate is 20% in Ecuador and 40% in Taiwan. It costs Ecuador Inc. $25 to assemble each widget. Ecuador Inc. sells all 1,000 widgets of its production to Taiwan Inc. at a negotiated price of $65 per unit. Taiwan Inc. sold all 1,000 widgets to independent customers for $90 per unit. . Is the group's (i.e., single economic unit's) world-wide gross profit arm's length? a. No, because Ecuador and Taiwan are related entities. b. No, because the subsidiaries are engaged in intercompany transactions c. Yes, because Ecuador pays its vendors an arm's length price and Taiwan sells its product at an arm's length price. d. Yes, because the intercompany price is a fairly negotiated price.