Exam 8: Consolidated Tax Returns

Parent Corporation owns all of the stock of Richards and Smith Corporations on January 1.The three corporations have filed consolidated tax returns for a number of calendar years.Parent sells all of the stock of Richards Corporation on June 1.Parent purchases all of the stock of Taylor Corporation on September 1.Parent sells all of the stock of Smith Corporation on November 1.When does the affiliated group terminate?

Identify which of the following statements is true.

A separate return year is a corporation's tax year for which it files a separate tax return or files a consolidated tax return with another affiliated group.

Ajak Corporation owns 85% of the single class of Utech Corporation stock.Utech Corporation owns 35% of Tech Corporation.Ajak Corporation also owns 50% of Tech Corporation,and Tech Corporation owns 75% of Baxter Corporation.

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.)

Subsidiary Corporation purchases a used machine from Parent Corporation in an intercompany transaction.Which of the following events is a corresponding event for the intercompany transaction?

Which of the following statements is true?

The election to file a consolidated return is made annually.

Identify which of the following statements is false.

Which of the following events is an intercompany transaction?

Identify which of the following statements is true.

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.

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 tax return.The results for 2018 and 2019 are: Taxable Income Parent (\ 10,000) \ 50,000 Subsidiary 30,000 (25,000) How much of Subsidiary's loss can be carried back to last year?

The IRS can attempt to collect taxes owed on a consolidated return from any of the members of the consolidated group.

Blair and Cannon Corporations are the two members of an affiliated group.No prior net Sec.1231 losses have been reported by any group member.The two corporations report consolidated ordinary income of $100,000 and gains and losses from property transactions as follows: Corporation STCG/STCL LTCG/LTCL Sec. 1231 Gains and Losses Blair (\ 5,000) \ 6,000 \ 3,000 Cannon 6,000 (7,000) (3,000) Included in the above totals is $6,000 of long-term capital losses recognized by Cannon on an intercompany transaction.Excluded from the above is a $4,000 Sec.1231 gain originally deferred by Cannon that must be reported by the group in the current year. Which one of the following statements is incorrect?

Blair and Cannon Corporations are members of an affiliated group.No prior net Sec.1231 losses have been reported by any group member.The two corporations report consolidated ordinary income of $100,000 and gains and losses from property transactions as follows. Corporation STCG/STCL LTCG/LTCL Sec. 1231 Gains and Losses Blair (\ 5,000) \ 6,000 \ 3,000 Cannon 6,000 (7,000) (3,000) Which of the following statements is correct?

Parent and Subsidiary Corporations are members of an affiliated group.Their separate taxable incomes (before taking into account any dividends)are $75,000 and $85,000,respectively.Subsidiary Corporation receives a dividend from a less-than-20%-owned corporation of $8,000 and from an affiliated 100%-owned nonconsolidated insurance subsidiary of $40,000.Subsidiary distributes a dividend of $35,000 to Parent Corporation who also receives dividends of $6,000 from a less-than-20%-owned corporation.The consolidated dividends-received deduction is what?

Identify which of the following statements is true.

Identify which of the following statements is true.

Which of the following events is an intercompany transaction that requires the deferral and later recognition of income?