USAco, a domestic corporation, is the wholly-owned U.S. subsidiary of FORco, a foreign corporation. The IRS conducts a transfer pricing examination of USAco's purchase of widgets from FORco for resale in the United States. Under the requirements of Code Sec. 6038A, the IRS requests that USAco, as the agent of FORco, provide FORco's widget production costs. USAco fails to respond. As a result of USAco failure to respond:

USAco must introduce the production cost records at trial.

the statute of limitations extends indefinitely.

the IRS may reduce USAco's cost of goods sold.

USAco automatically incurs a transfer pricing penalty.