Question 1

Brother-sister controlled groups can elect to file a consolidated tax return.

Accepted Answer

A) True 
 B)False

Question 2

To be an affiliated group,the parent corporation must directly own at least 80% of another group member.

Accepted Answer

A) True 
 B)False

Question 3

Identify which of the following statements is false.

Accepted Answer

A) Inventory sales between group members are an example of an intercompany transaction. 
B) The basis to the purchasing member of property acquired in an intercompany transaction is the amount of cash paid to the selling member. 
C) The holding period for property acquired in an intercompany transaction begins when the corresponding item is reported. 
D) In general,buyers and sellers engaging in an intercompany transaction are treated as separate entities. 
A) Inventory sales between group members are an example of an intercompany transaction. 
B) The basis to the purchasing member of property acquired in an intercompany transaction is the amount of cash paid to the selling member. 
C) The holding period for property acquired in an intercompany transaction begins when the corresponding item is reported. 
D) In general,buyers and sellers engaging in an intercompany transaction are treated as separate entities.

Question 4

An affiliated group elects the use of the consolidated method for filing its tax return by

Accepted Answer

A) filing Form 1120. 
B) filing a consent to the election from each member of the affiliated group in the initial year. 
C) filing an affiliations schedule. 
D) All of the above are necessary for the election. 
A) filing Form 1120. 
B) filing a consent to the election from each member of the affiliated group in the initial year. 
C) filing an affiliations schedule. 
D) All of the above are necessary for the election.

Question 5

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): $$\begin{array} { | l | r | } 
\hline { \text { Corporation } } & \text { Taxable Income } \
\hline \text { Blue } & \$ 150,000 \
\hline \text { Gold } & ( 25,000 ) \
\hline \text { Green (since acquisition) } & 100,000 \
\hline
\end{array}$$ Which of the following statements is correct?

Accepted Answer

A) Last year's NOL cannot be carried back. 
B) The portion of last year's NOL that is not used as a carryback can be carried over the current year but is only used against Blue's taxable income. 
C) The portion of last year's NOL that is not used as a carryback can be carried over against the current consolidated taxable income,but is subject to the Sec.382 limitation. 
D) The portion of last year's NOL that is not used as a carryback can be carried over,but is used only against the Blue's and Gold's taxable income. 
A) Last year's NOL cannot be carried back. 
B) The portion of last year's NOL that is not used as a carryback can be carried over the current year but is only used against Blue's taxable income. 
C) The portion of last year's NOL that is not used as a carryback can be carried over against the current consolidated taxable income,but is subject to the Sec.382 limitation. 
D) The portion of last year's NOL that is not used as a carryback can be carried over,but is used only against the Blue's and Gold's taxable income.

Question 6

The Alpha-Beta affiliated group has consolidated taxable income of $400,000 and tentative general business credit of $80,000 in the current year.The maximum general business credit that can be used on the consolidated return is

Accepted Answer

A) $69,250. 
B) $14,750. 
C) $80,000. 
D) $64,000. 
A) $69,250. 
B) $14,750. 
C) $80,000. 
D) $64,000.

Question 7

Boxcar Corporation and Sidecar Corporation,an affiliated group,reports the following results for the current year: $$\begin{array} { | c | c | c | c | } 
\hline \text { Corporation } & \begin{array} { c } 
\text { Ordinary } \
\text { Income }
\end{array} & \text { STCG/STCL } & \text { LTCG/LTCL } \
\hline \text { Boxcar } & \$ 10,000 & \$ 10,000 & ( \$ 5,000 ) \
\text { Sidecar } & 30,000 & ( 12,000 ) & 16,000 \
\hline
\end{array}$$ The affiliated group's consolidated taxable income is

Accepted Answer

A) $40,000. 
B) $49,000. 
C) $51,000. 
D) $52,000. 
A) $40,000. 
B) $49,000. 
C) $51,000. 
D) $52,000.

Question 8

Pants and Skirt Corporations are affiliated and have filed consolidated tax returns for the past three years.Pants acquires 100% of Zipper stock on January 1 of 2019.Zipper Corporation filed separate returns previously.Pants,Skirt,and Zipper filed a consolidated return for 2019 and reported the following taxable incomes: $$\begin{array} { | c | c | c | } 
\hline \text { Corporation } & \text { Taxable Income } & \text { Taxable Income } \
& \mathbf { 2 0 1 8 } & \mathbf { 2 0 1 9 } \
\hline \text { Pants } & \$ 18,000 & \$ 12,000 \
\text { Skirt } & 9,000 & 8,000 \
\text { Zipper } & ( 17,000 ) & 20,000 \
\hline
\end{array}$$ How much of the 2018 Zipper NOL be used to offset CTI in 2019?

Accepted Answer

A) $20,000 
B) $17,000 
C) $16,000 
D) $0 
A) $20,000 
B) $17,000 
C) $16,000 
D) $0

Question 9

Identify which of the following statements is true.

Accepted Answer

A) Corporations that join in a consolidated return must adopt the same tax year as the parent corporation. 
B) Permission to discontinue the filing of consolidated tax returns is sometimes granted by the IRS. 
C) Additional administrative costs may be incurred when filing a consolidated tax return. 
D) All of the above are true. 
A) Corporations that join in a consolidated return must adopt the same tax year as the parent corporation. 
B) Permission to discontinue the filing of consolidated tax returns is sometimes granted by the IRS. 
C) Additional administrative costs may be incurred when filing a consolidated tax return. 
D) All of the above are true.

Question 10

An advantage of filing a consolidated return is that losses of one affiliated group member may be offset against the taxable income of other group members in the same tax year.

Accepted Answer

A) True 
 B)False

Question 11

Parent and Subsidiary Corporations have filed calendar-year consolidated tax returns for several years.Parent Corporation uses the cash method of accounting while Subsidiary Corporation uses the accrual method of accounting.If Parent lends Subsidiary money

Accepted Answer

A) the interest expense is deductible when accrued. 
B) the interest expense and interest income may be reported in different consolidated return years. 
C) the interest income is reported when the interest expense is accrued by Subsidiary. 
D) the interest expense deduction is taken when Parent reports the interest income. 
A) the interest expense is deductible when accrued. 
B) the interest expense and interest income may be reported in different consolidated return years. 
C) the interest income is reported when the interest expense is accrued by Subsidiary. 
D) the interest expense deduction is taken when Parent reports the interest income.

Question 12

A Canadian subsidiary cannot file as part of the consolidated group with its U.S.parent.

Accepted Answer

A) True 
 B)False

Question 13

Intercompany sales between members of an affiliated group filing separate returns cause deferred tax assets to be recognized by both buyer and seller.

Accepted Answer

A) True 
 B)False

Question 14

Identify which of the following statements is true.

Accepted Answer

A) When a new corporation joins an affiliated group,all of its income and expense items for the tax year,including the acquisition date,must be allocated between the separate tax return and consolidated tax return that are to be filed based on the number of days included in each of the two tax years. 
B) A consolidated return election may be revoked after 5 years. 
C) All members of a consolidated group must use the same tax year. 
D) All of the above are false. 
A) When a new corporation joins an affiliated group,all of its income and expense items for the tax year,including the acquisition date,must be allocated between the separate tax return and consolidated tax return that are to be filed based on the number of days included in each of the two tax years. 
B) A consolidated return election may be revoked after 5 years. 
C) All members of a consolidated group must use the same tax year. 
D) All of the above are false.

Question 15

Identify which of the following statements is true.

Accepted Answer

A) If 100% of the stock of two corporations is owned by the same individual,the two corporations are eligible to file a consolidated return. 
B) The check-the-box regulations permit partnership and LLCs to elect C corporation tax treatment. 
C) A group of corporations that meets the parent-subsidiary controlled group requirements is always eligible to file a consolidated return. 
D) All of the above are false. 
A) If 100% of the stock of two corporations is owned by the same individual,the two corporations are eligible to file a consolidated return. 
B) The check-the-box regulations permit partnership and LLCs to elect C corporation tax treatment. 
C) A group of corporations that meets the parent-subsidiary controlled group requirements is always eligible to file a consolidated return. 
D) All of the above are false.

Question 16

Mako and Snufco Corporations are affiliated and have filed consolidated returns for the first time in 2019.Mako acquired 100% of Zebco stock on January 1 of 2019,the date of Zebco's formation.Mako,Snufco,and Zebco,report the following taxable incomes for 2018 and 2019. $$\begin{array} { | c | c | c | } 
\hline \text { Corporation } & \text { Taxable Income } & \text { Taxable Income } \
& \mathbf { 2 0 1 8 } & \mathbf { 2 0 1 9 } \
\hline \text { Mako } & \$ 18,000 & \$ 12,000 \
\text { Snufco } & 9,000 & 8,000 \
\text { Zebco } & ( 25,000 ) & 15,000 \
\hline
\end{array}$$ How much of the 2018 Zebco NOL be used to offset CTI in 2019?

Accepted Answer

A) $15,000 
B) $20,000 
C) $12,000 
D) $0 
A) $15,000 
B) $20,000 
C) $12,000 
D) $0

Question 17

Identify which of the following statements is true.

Accepted Answer

A) To be part of an affiliated group,a corporation must be at least 80% directly owned by another group member. 
B) Only common stock is considered when determining if the 80% ownership test is met for affiliated group eligibility. 
C) An affiliated group electing to file a consolidated return may be composed of as few as two corporations. 
D) All of the above are false. 
A) To be part of an affiliated group,a corporation must be at least 80% directly owned by another group member. 
B) Only common stock is considered when determining if the 80% ownership test is met for affiliated group eligibility. 
C) An affiliated group electing to file a consolidated return may be composed of as few as two corporations. 
D) All of the above are false.

Question 18

Mariano owns all of Alpha Corporation,which owns 100% of Beta Corporation's single class of stock.On January 1,Alpha and Beta Corporations report a consolidated NOL carryover from prior years.What is the maximum percentage of Alpha Corporation's single class of stock that Mariano can sell to a single shareholder without triggering the Sec.382 loss limitation?

Accepted Answer

A) 0% 
B) 50% 
C) 75% 
D) 80% 
A) 0% 
B) 50% 
C) 75% 
D) 80%

Question 19

Diana Corporation owns stock of Tomika Corporation.For Diana and Tomika to qualify for the filing of consolidated returns,at least what percentage of Tomika's total voting power and total value of stock must be directly owned by Diana?

Accepted Answer

A)  $$\begin{array} {| l | l | } 
\hline \begin{array} { l } 
\text { Total voting } \
\text { power }
\end{array} & \begin{array} { l } 
\text { Total Value of } \
\text { stock }
\end{array} \
\hline 51 \% & 51 \% \
\hline
\end{array}$$ 
B)  $$\begin{array} {| l | l | } 
\hline \begin{array} { l } 
\text { Total voting } \
\text { power }
\end{array} & \begin{array} { l } 
\text { Total Value of } \
\text { stock }
\end{array} \
\hline 51 \% & 80 \% \
\hline
\end{array}$$ 
C)  $$\begin{array} {| l | l | } 
\hline \begin{array} { l } 
\text { Total voting } \
\text { power }
\end{array} & \begin{array} { l } 
\text { Total Value of } \
\text { stock }
\end{array} \
\hline 80 \% & 51 \% \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Total voting } & \text { Total Value of } \
\text { power } &\text { power } \
\hline 80 \% & 80 \% \
\hline
\end{array}$$ 
A)  $$\begin{array} {| l | l | } 
\hline \begin{array} { l } 
\text { Total voting } \
\text { power }
\end{array} & \begin{array} { l } 
\text { Total Value of } \
\text { stock }
\end{array} \
\hline 51 \% & 51 \% \
\hline
\end{array}$$ 
B)  $$\begin{array} {| l | l | } 
\hline \begin{array} { l } 
\text { Total voting } \
\text { power }
\end{array} & \begin{array} { l } 
\text { Total Value of } \
\text { stock }
\end{array} \
\hline 51 \% & 80 \% \
\hline
\end{array}$$ 
C)  $$\begin{array} {| l | l | } 
\hline \begin{array} { l } 
\text { Total voting } \
\text { power }
\end{array} & \begin{array} { l } 
\text { Total Value of } \
\text { stock }
\end{array} \
\hline 80 \% & 51 \% \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Total voting } & \text { Total Value of } \
\text { power } &\text { power } \
\hline 80 \% & 80 \% \
\hline
\end{array}$$

Question 20

Which of the following intercompany transactions creates temporary book/tax differences when a parent corporation owns 100% of a subsidiary's stock and the companies file a consolidated return?

Accepted Answer

A) intercompany dividends 
B) undistributed subsidiary earnings 
C) intercompany sale 
D) None of the above items create temporary differences. 
A) intercompany dividends 
B) undistributed subsidiary earnings 
C) intercompany sale 
D) None of the above items create temporary differences.

Exam 8: Consolidated Tax Returns

Brother-sister controlled groups can elect to file a consolidated tax return.

To be an affiliated group,the parent corporation must directly own at least 80% of another group member.

Identify which of the following statements is false.

An affiliated group elects the use of the consolidated method for filing its tax return by

The Alpha-Beta affiliated group has consolidated taxable income of $400,000 and tentative general business credit of $80,000 in the current year.The maximum general business credit that can be used on the consolidated return is

Boxcar Corporation and Sidecar Corporation,an affiliated group,reports the following results for the current year: Corporation Ordinary Income STCG/STCL LTCG/LTCL Boxcar \ 10,000 \ 10,000 (\ 5,000) Sidecar 30,000 (12,000) 16,000 The affiliated group's consolidated taxable income is

Identify which of the following statements is true.

An advantage of filing a consolidated return is that losses of one affiliated group member may be offset against the taxable income of other group members in the same tax year.

Parent and Subsidiary Corporations have filed calendar-year consolidated tax returns for several years.Parent Corporation uses the cash method of accounting while Subsidiary Corporation uses the accrual method of accounting.If Parent lends Subsidiary money

A Canadian subsidiary cannot file as part of the consolidated group with its U.S.parent.

Intercompany sales between members of an affiliated group filing separate returns cause deferred tax assets to be recognized by both buyer and seller.

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.

Diana Corporation owns stock of Tomika Corporation.For Diana and Tomika to qualify for the filing of consolidated returns,at least what percentage of Tomika's total voting power and total value of stock must be directly owned by Diana?

Which of the following intercompany transactions creates temporary book/tax differences when a parent corporation owns 100% of a subsidiary's stock and the companies file a consolidated return?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Administrative Procedures

U.S. Taxation of Foreign-Related Transactions

an Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Deductions and Losses

Business Expenses and Deferred Compensation

Itemized Deductions

Losses and Bad Debts

Depreciation,cost Recovery,amortization,and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods,tax Credits,and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters