Scenario: HKCo, based in Hong Kong with a corporate tax rate of $16\mathrm{.}5\%,$ sells widgets to its U$.$S$.$ subsidiary, USDist, which then resells them in the U$.$S$.$ There is not a tax treaty between Hong Kong and the U$.$S$.,$ meaning all dividends from HKco to the U$.$S$.$ are subject to a the tax benefits of shifting income from USDist to HKco, you are tasked with evaluating different transfer pricing methods to optimize the tax situation of the combined group.

Clven Data:

Manufacturing cost of widgets: $$600$ per unit.

Resale price in the U$.$S$.$: $$1,000$ per unit.

HKco's corporate tax rate: $16\mathrm{.}5\%.$

Industry standard markup is $20\%.$

Typical gross profit margin of a competitor is $10\%.$

A competitor selling a similar product lists the manufacturer suggested retail price $($MSRP$)$ at $$1,000$

Tasks Evaluate the following transfer pricing methods to determine which would be most beneficial for the combined group:

Comparable Uncontrolled Price $($CUP$)$ Method

Cost Plus Method

Resale Price Method

Objective: Determine the transfer price per unit for each method and identify which method provides the greatest tax savings for the combined group $($Gkce and USDist$).$