Assignment:
A taxpayer owns two separate companies. Company A is in the 35% marginal tax bracket and company B is in the 15% tax bracket. Company A sells all its output to B at cost, and B sells to outsiders at a markup of 50%. Company A’s revenues total $2 million, whereas company B’s revenues total $3 million. What are the tax implications of this arrangement? How will the IRS react?
Your answer must be typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.