1.USACo, a U.S. corporation, manufactures and sells card tables in the United States. USACo also sells card tables to its Canadian subsidiary, CANACo, for resale in Canada. USACo's largest U.S. customer purchases 40% of USACo's output for $150 per card table. CANACo also purchases 40% of USACo's output based on the same contracting terms as USACo's largest U.S. customer. The price USACo should charge CANACo per card table under the comparable uncontrolled price method is:

(a) $0. (b) $120. (c) $80. (d) $150.

2. USCo, a U.S. corporation, purchases violins from its foreign parent,

FORCo, for $800 and resells them to U.S customers for $1,000. A search of available information for independent U.S. distributors of violins shows that the

independent U.S. distributors earn a profit on resales (expressed as a percentage of the resale price) of 30%. Under the resale price method, the arm's length price that USCo should pay FORCo for violins is:

(a) $700.

(b) $900.

(c) $800.

(d) $1,000.

3.Joel Corporation, a U.S. corporation, is the wholly-owned subsidiary of Jerry Corporation, a foreign corporation. Jerry Corporation manufactures motorcycles at its manufacturing facilities abroad and then sells them to Joel Corporation for resale in the United States. With its Form 1120, Joel Corporation must file a:

(a) Form 6166. (b) Form 1118. (c) Form 5471. (d) Form 5472.

4.Somer Corporation, a U.S. corporation, is a wholly-owned subsidiary of a Japanese parent, Wonder Corporation, which manufactures yachts. During the current year, Somer pays

$50 million for yachts from Wonder Corporation. If Somer Corporation fails to contemporaneously document its transfer pricing practices and the IRS makes an adjustment of $25 million, Somer Corporation is:

(a) subject to the transfer pricing penalty.

(b) within 30 days of the adjustment, able to gather its transfer pricing documents and submit it to the IRS.

(c) not subject to any transfer pricing penalty.

(d) not eligible for an advance pricing agreement.