A taxpayer wishing to reduce the negative tax effects of the application of the unitary theory might:

Question

Quizplus · Accepted Answer

Affiliating with a service division, such as marketing, can help to reduce the negative tax effects of the unitary theory. These divisions typically do not earn significant profits and are not subject to the same level of taxation as other units within the company.

Disengaging from the most profitable affiliates can also be an effective strategy, as it can limit the overall income that is subject to taxation.

Adding a profitable entity to the unitary group, on the other hand, may actually increase the negative tax effects of the unitary theory. This is because the income of this entity will be combined with the income of the other affiliates, resulting in a higher overall tax liability.

Therefore, options A and C are good choices, while option B is not. The best answer is D, which includes both recommended choices.

A Taxpayer Wishing to Reduce the Negative Tax Effects of the Application