Transfer pricing is probably one of the biggest tax issues facing taxing authorities. Transfer pricing involves allocating revenues and costs between countries in order to create the best possible tax situation for a multinational company. For this assignment, you will be required to respond to the following scenario:
A multinational company has hired you as its tax professional to advise the company on how to use transfer pricing to avoid or mitigate taxes. This company manufactures and sells cars in the U.S. and two (2) foreign countries.
Using the Internet, research the rules and techniques for transfer pricing. Choose two foreign countries and research their respective tax rates.
Write a six (6) page paper in which you:
1.Based on your research, create projections of revenues, costs, and tax rates for all three (3) countries, including the U.S. Provide support for your projections.
2.Based on your projections, create at least two (2) scenarios in which you allocate revenues and costs to each country to determine the lowest possible overall tax for each country. Provide support for your rationale.
3.Create at least three (3) scenarios and propose a scenario to the client that will result in a favorable tax position. Provide support for your rationale.
4.Create at least three (3) scenarios and propose a scenario to your client that is less likely to result in an IRS audit. Provide support for your rationale.
5.Assume that the IRS has challenged the allocations and is preparing to audit the client. Prepare a position to defend the client to IRS. Provide support for your position.
6.Imagine that you are an IRS agent auditing a multinational company’s transfer pricing methods. Evaluate the tools you could use to perform the audit and propose an audit plan. Provide support for the strategy.
7.Use at least seven (7) quality resources in this assignment
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA.
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