Exam 8: Consolidated Tax Returns

Parent and Subsidiary Corporations form an affiliated group. In 2018, the initial year of operation, Parent and Subsidiary filed separate returns. In 2019, the group files a consolidated return. Taxable Income How much of the Subsidiary loss can be carried back to last year?

Alto and Bass Corporations have filed consolidated tax returns for several calendar years. At the close of business on September 30, Alto Corporation sells all of the Bass Corporation stock. What portion of Alto's and Bass's income for the current year will be included in the consolidated return, assuming its income is earned evenly throughout the year and all months have 30 days?

P and S comprise an affiliated group that filed consolidated returns in 2018, 2019 and 2020. They report the following for 2018, 2019 and 2020. Taxable Income How much of the Subsidiary 2018 loss can be utilized against consolidated net income in 2019?

What are the differences between a controlled group and an affiliated group?

P and S are members of an affiliated group that has filed consolidated tax returns for a number of years. The sale of inventory by P that was acquired from S in an intercompany transaction outside the affiliated group triggers the recognition of gain by S.

A member's portion of a consolidated NOL may be carried back against that member's taxable income from the preceding two separate return years.

Blue and Gold Corporations are members of the Blue-Gold affiliated group, which filed a consolidated tax return for last year, reporting a $200,000 consolidated NOL. Small taxable income amounts were reported by Blue and Gold in separate tax returns filed in years prior to last year. Early in the current year, 100% of Blue's stock is purchased by Robert Martin who contributes additional funds to Blue Corporation sufficient to acquire all of Green Corporation's stock. For the current year, the affiliated group reports the following results (excluding the consolidated NOL deduction): Which of the following statements is correct?

Identify which of the following statements is true.

Parent Corporation purchases a machine (a five-year property) for $20,000. It claims $4,000 of depreciation under the MACRS rules in the first year it owns the property. At the close of business on the last day of the first year, Parent sells the machine to a 100%-owned corporation (Subsidiary) for $18,000. Subsidiary immediately commences depreciating the machine as a five-year property using the regular MACRS rules. What gain is reported by Parent Corporation in the first year that Subsidiary Corporation depreciates the machine?

Cardinal and Bluebird Corporations both use a calendar year as their tax year. At the close of business on June 30, Cardinal Corporation buys all of Bluebird Corporation's stock. If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year, what portion of Cardinal's income will be included in the consolidated return? (Assume all months have 30 days.)