Alamo, a Texas corporation, manufactures plastic components that it sells to Vegas, a Mexican corporation, for assembly

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Alamo, a Texas corporation, manufactures plastic components that it sells to Vegas, a Mexican corporation, for assembly into a variety of finished goods. Alamo owns 60 percent of Vegas’s stock. Alamo’s cost per component is $85, its selling price per component is $100, and it sold 70,000 components to Vegas this year. Alamo’s taxable income as reported on its Form 1120 was $900,000, and Vegas’s taxable income as reported on its Mexican corporate income tax return was $1.2 million. Compute any increase or decrease in the taxable incomes of both corporations if the IRS determines that an arm’s-length transfer price per plastic component is $108.
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