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. What will the overall tax rate be if Tio instructed Ecuador to increase the price it charged Taiwan for each widget to $80 per unit?

a. 25% 

b. 28% 

c. 21% 

d. 23.08%

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.

Which taxing jurisdiction would contest the discretionary transfer price of $80?

	a.	United States
	b.	Ecuador
	c.	Taiwan
	d.	All of the above

Answer rating: 100% (QA)

Ecuadr Cit 25 Prunlt Sell So pr ... View the full answer