Analysis of a Formulary System, Part IV: Choosing a Tax Base

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The author, whose earlier articles advocated formulary apportionment over an arm's-length approach to transfer pricing, examines a limited type of apportionment that would apply formulas not to a taxpayer's global combined income, but to separate measures of the taxpayer's combined income from particular business activities. This activity-by-activity approach, he says, would offer some, but not all, of the administrative benefits of the full-fledged, combined-income formulary approach.

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