USAco, a domestic corporation, is a wholly-owned subsidiary of its Japanese parent corporation, ASIAco, which manufactures lightbulbs. During the current year, USAco pays $100 million for 100 million lightbulbs from ASIAco. If USAco fails to contemporaneously document its transfer pricing practices and the IRS adjusts the transfer price to $60 million (a reduction of $40 million), USAco is:

Question 11 options:

1)	subject to the transfer pricing transactional penalty.

2)	not eligible to contemporaneously document its transfer pricing practices in future years.

3)	subject to the transfer pricing net adjustment penalty.

4)	not eligible for an advance pricing agreement.