Question 1

Identify which of the following statements is true.

Accepted Answer

A)  If a corporation becomes a member of an affiliated group within the first thirty days of the corporation's tax year, the corporation can elect not to file a short- period tax return. 
B)  When a corporation joins in filing a consolidated return, taxable income of the member is combined with other members' taxable income prior to any adjustments. 
C)  A corporation may be required to file a separate return and file with an affiliated group in the same calendar year. 
D)  All of the above are false. 
A)  If a corporation becomes a member of an affiliated group within the first thirty days of the corporation's tax year, the corporation can elect not to file a short- period tax return. 
B)  When a corporation joins in filing a consolidated return, taxable income of the member is combined with other members' taxable income prior to any adjustments. 
C)  A corporation may be required to file a separate return and file with an affiliated group in the same calendar year. 
D)  All of the above are false. C

Question 2

Last year, Trix Corporation acquired 100% of Track Corporation. The acquisition occurred on July 1, which was five months after Track's creation. The corporations filed separate returns that year and have filed consolidated returns since then. The group results for the years, excluding the NOL deduction, are shown below. $$\begin{array} { | c | c | c | } 
\hline \text { Corporation } & \begin{array} { c } 
\text { Taxable Income } \
\text { Last year }
\end{array} & \begin{array} { c } 
\text { Taxable Income } \
\text { Current year }
\end{array} \
\hline \text { Trix } & ( \$ 12000 ) & \$ 34,000 \
\text { Track } & ( 10,000 ) & ( 2,000 ) \
\text { Consolidated Taxable Income } & ( \$ 22,000 ) & \$ 32,000 \
\hline
\end{array}$$ Which of the following statements is incorrect?

Accepted Answer

A)  None of Track's last year's loss can be used to offset the current year's consolidated taxable income. 
B)  Last year is an SRLY (separate return limitation year) with respect to Track Corporation. 
C)  Track's last year loss is offset against the consolidated current taxable income. 
D)  Track's last year loss can be used to offset the current year's consolidated taxable income. 
A)  None of Track's last year's loss can be used to offset the current year's consolidated taxable income. 
B)  Last year is an SRLY (separate return limitation year) with respect to Track Corporation. 
C)  Track's last year loss is offset against the consolidated current taxable income. 
D)  Track's last year loss can be used to offset the current year's consolidated taxable income. D

Question 3

Which of the following corporations is an includible corporation for purposes of filing a consolidated tax return?

Accepted Answer

A)  S corporations 
B)  insurance companies 
C)  car manufacturing corporation 
D)  foreign corporations 
A)  S corporations 
B)  insurance companies 
C)  car manufacturing corporation 
D)  foreign corporations C

Question 4

Identify which of the following statements is true.

Accepted Answer

A)  When applying the large corporation rules for purposes of determining underpayments, each member of an affiliated group is considered separately. 
B)  Once consolidated tax returns have been filed for two consecutive years, the affiliated group must pay estimated taxes on a consolidated basis. 
C)  The entire consolidated tax liability cannot be collected from one group member. 
D)  All of the above are false. 
A)  When applying the large corporation rules for purposes of determining underpayments, each member of an affiliated group is considered separately. 
B)  Once consolidated tax returns have been filed for two consecutive years, the affiliated group must pay estimated taxes on a consolidated basis. 
C)  The entire consolidated tax liability cannot be collected from one group member. 
D)  All of the above are false.

Question 5

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 6

What is the consequence of having losses subject to the SRLY limitations?

Accepted Answer

The effect of having a loss ta

Question 7

Jackson and Tanker Corporations are members of an affiliated group. The two corporations have been affiliated since they were formed last year. Both corporations have always used a calendar year as their tax year. Tanker, the subsidiary, has a separate return year NOL of $14,000 from last year. Jackson Corporation has a separate return year NOL of $16,000 from last year. Commencing this year, the two corporations filed a consolidated tax return. The NOLs can be carried over

Accepted Answer

A)  to a consolidated return year and both are SRLY (separate return limitation year) losses. 
B)  to a consolidated return year and Jackson's loss is a SRLY loss. 
C)  to a consolidated return year and Tanker's loss is a SRLY loss. 
D)  to a consolidated return year without limit. 
A)  to a consolidated return year and both are SRLY (separate return limitation year) losses. 
B)  to a consolidated return year and Jackson's loss is a SRLY loss. 
C)  to a consolidated return year and Tanker's loss is a SRLY loss. 
D)  to a consolidated return year without limit.

Question 8

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

Question 9

Roland, Shedrick, and Tyrone Corporations formed an affiliated group a number of years ago, which has since filed consolidated tax returns. No prior Sec. 1231 losses have been reported by any group member. The group had a consolidated capital loss carryover last year. For the current year, the group reports the following results: $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Corporation } & \begin{array} { c } 
\text { Ordinary } \
\text { Income }
\end{array} & \text { STCG/STCL } & \text { LTCG/LTCL } & \begin{array} { c } 
\text { Sec. 1231 } \
\text { Gains and Losses }
\end{array} \
\hline \text { Roland } & \$ 25,000 & \$ 4,000 & ( \$ 2,000 ) & ( \$ 5,000 ) \
\text { Shedrick } & 30,000 & ( 2,000 ) & 14,000 & ( 2,000 ) \
\text { Tyrone } & 20,000 & ( 3,000 ) & 8,000 & ( 3,000 ) \
\hline
\end{array}$$ Which of following statements is incorrect?

Accepted Answer

A)  No Sec. 1231 recapture can occur this year. 
B)  The net capital gain is taxed at the regular corporate tax rates. 
C)  The net capital gain is $20,000. 
D)  The Sec. 1231 loss is treated as an ordinary loss. 
A)  No Sec. 1231 recapture can occur this year. 
B)  The net capital gain is taxed at the regular corporate tax rates. 
C)  The net capital gain is $20,000. 
D)  The Sec. 1231 loss is treated as an ordinary loss.

Question 10

Identify which of the following statements is true.

Accepted Answer

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

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

The treatment of capital loss carrybacks and carryovers is similar to NOLs.

Accepted Answer

A) True 
 B)False

Question 14

What types of corporations are not includible corporations for purposes of determining whether or not an affiliated group exists?

Accepted Answer

Special tax status corporations are not

Question 15

Identify which of the following statements is true.

Accepted Answer

A)  The dividends- received deduction cannot be taken in full on a consolidated return if the deduction amount creates or increases a consolidated NOL. 
B)  The dividends- received deduction limitation for dividends received by members of an affiliated group from nonmembers is applied to the separate taxable income of each group member. 
C)  A shareholder corporation that receives a nondividend distribution from an affiliated group member is not required to recognize a gain when the distribution amount exceeds the shareholder's basis in the distributing corporation's stock. 
D)  All of the above are false. 
A)  The dividends- received deduction cannot be taken in full on a consolidated return if the deduction amount creates or increases a consolidated NOL. 
B)  The dividends- received deduction limitation for dividends received by members of an affiliated group from nonmembers is applied to the separate taxable income of each group member. 
C)  A shareholder corporation that receives a nondividend distribution from an affiliated group member is not required to recognize a gain when the distribution amount exceeds the shareholder's basis in the distributing corporation's stock. 
D)  All of the above are false.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Gee Corporation purchased land from an unrelated corporation several years ago for $105,000. The land was used by Gee as a storage lot for company trucks. Gee sold the land to Wilkers, its 85%- owned subsidiary corporation, last year (July 3) for $115,000. The land was also used in Wilkers' trade or business. Wilkers Corporation sold the land this year (August 22) for $130,000 to a corporation that was not a member of the affiliated group. The $130,000 purchase price is to be collected in five equal, annual installments, commencing with the current year's sale date. What gains and losses are recognized, deferred, or restored by Gee and Wilkers Corporations?

Accepted Answer

Gee Corporation must report the $10,000

Question 18

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

Question 19

Identify which of the following statements is true.

Accepted Answer

A)  Last year, P, S, and T Corporations have filed consolidated tax returns for a number of years. Last year P Corporation sold land (a Sec. 1231 asset) to T at a $75,000 profit. The gain was deferred by P in last year's consolidated tax return. P sold the T stock to Mike on June 1 of this year. The stock sale will require P to report in its income the gain that was deferred on the land sale. 
B)  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, which was acquired from S in an intercompany transaction, outside the affiliated group triggers the restoration of gain by S. 
C)  The basic accounting method elections that are used by the seller in intercompany transactions do not override the intercompany transaction rules. 
D)  All of the above are true. 
A)  Last year, P, S, and T Corporations have filed consolidated tax returns for a number of years. Last year P Corporation sold land (a Sec. 1231 asset) to T at a $75,000 profit. The gain was deferred by P in last year's consolidated tax return. P sold the T stock to Mike on June 1 of this year. The stock sale will require P to report in its income the gain that was deferred on the land sale. 
B)  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, which was acquired from S in an intercompany transaction, outside the affiliated group triggers the restoration of gain by S. 
C)  The basic accounting method elections that are used by the seller in intercompany transactions do not override the intercompany transaction rules. 
D)  All of the above are true.

Question 20

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: $$\begin{array} { | c | c | c | c | } 
\hline \text { Corporation } & \text { STCG/STCL } & \text { LTCG/LTCL } & \begin{array} { c } 
\text { Sec.1231 } \
\text { Gains and Losses }
\end{array} \
\hline \text { Blair } & ( \$ 5,000 ) & \$ 6,000 & \$ 3,000 \
\text { Cannon } & 6,000 & ( 7,000 ) & ( 3,000 ) \
\hline
\end{array}$$ 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?

Accepted Answer

A)  The affiliated group reports a $4,000 net Sec. 1231 gain. 
B)  The consolidated group must report a net long- term capital gain of $9,000 and a net short- term capital gain of $1,000. 
C)  Cannon Corporation's separate return reports a $6,000 net long- term capital gain. 
D)  None of the above statements are incorrect. 
A)  The affiliated group reports a $4,000 net Sec. 1231 gain. 
B)  The consolidated group must report a net long- term capital gain of $9,000 and a net short- term capital gain of $1,000. 
C)  Cannon Corporation's separate return reports a $6,000 net long- term capital gain. 
D)  None of the above statements are incorrect.

Identify which of the following statements is true.

Which of the following corporations is an includible corporation for purposes of filing a consolidated tax return?

Identify which of the following statements is true.

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

What is the consequence of having losses subject to the SRLY limitations?

Identify which of the following statements is true.

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

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?

The treatment of capital loss carrybacks and carryovers is similar to NOLs.

What types of corporations are not includible corporations for purposes of determining whether or not an affiliated group exists?

Identify which of the following statements is true.

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

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

Identify which of the following statements is true.

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

Filters

Exam 8: Consolidated Tax Returns

Identify which of the following statements is true.

Which of the following corporations is an includible corporation for purposes of filing a consolidated tax return?

Identify which of the following statements is true.

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

What is the consequence of having losses subject to the SRLY limitations?

Identify which of the following statements is true.

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

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?

The treatment of capital loss carrybacks and carryovers is similar to NOLs.

What types of corporations are not includible corporations for purposes of determining whether or not an affiliated group exists?

Identify which of the following statements is true.

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

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

Identify which of the following statements is true.

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

Filters