Question 1

Identify which of the following statements is false.

Accepted Answer

A)  Affiliated groups of corporations filing a consolidated tax return are not eligible for the small corporation exemption from the corporate alternative minimum tax. 
B)  An intercompany transaction generally results in the selling member and buying member in a property transaction being treated as divisions of a single corporation. 
C)  Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return. 
D)  A corresponding item includes the income, gain, deduction, or loss amount reported by the buyer from an intercompany transaction, or from property acquired in an intercompany transaction. 
A)  Affiliated groups of corporations filing a consolidated tax return are not eligible for the small corporation exemption from the corporate alternative minimum tax. 
B)  An intercompany transaction generally results in the selling member and buying member in a property transaction being treated as divisions of a single corporation. 
C)  Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return. 
D)  A corresponding item includes the income, gain, deduction, or loss amount reported by the buyer from an intercompany transaction, or from property acquired in an intercompany transaction.

Question 2

A consolidated return's tax liability is owed by

Accepted Answer

A)  all group members in equal portions. 
B)  the group member responsible for that portion of the tax liability. 
C)  the parent corporation. 
D)  all group members who are severely liable. 
A)  all group members in equal portions. 
B)  the group member responsible for that portion of the tax liability. 
C)  the parent corporation. 
D)  all group members who are severely liable.

Question 3

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 for cash this year (August 22) for $130,000 to a corporation that was not a member of the affiliated group. What gains and losses are recognized, deferred, or restored by Gee and Wilkers Corporations?

Accepted Answer

Gee Corporation must report the $10,000

Question 4

Which of the following events is an intercompany transaction?

Accepted Answer

A)  a parent corporation's sale of stock of a subsidiary corporation to a nonmember of the group 
B)  dividend payment received from a subsidiary corporation to its parent corporation; the subsidiary corporation is not an includible corporation 
C)  a capital contribution 
D)  accrual of interest on a loan made by one group member to another group member; both group members use the accrual method of accounting 
A)  a parent corporation's sale of stock of a subsidiary corporation to a nonmember of the group 
B)  dividend payment received from a subsidiary corporation to its parent corporation; the subsidiary corporation is not an includible corporation 
C)  a capital contribution 
D)  accrual of interest on a loan made by one group member to another group member; both group members use the accrual method of accounting

Question 5

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

Question 6

How do intercompany transactions affect the calculation of capital gains/losses?

Accepted Answer

Deferred intercompany gains/lo

Question 7

On January 1, 2018, Alpha Corporation purchases 100% of the stock of Omega Corporation for $2 million. During the year, Omega Corporation earns $300,000 of taxable income, $30,000 of tax- exempt income, and distributes $150,000 in dividends. Each company paid its own tax liability. What basis adjustment must Alpha Corporation make at year- end?

Accepted Answer

Alpha Corporation's initial basis for th

Question 8

Define intercompany transactions and explain the two types of transactions.

Accepted Answer

An intercompany transaction takes place

Question 9

Parent Corporation sells land (a capital asset) to Subsidiary Corporation in an intercompany transaction, realizing a $25,000 gain. Subsidiary uses the land for five years in its trade or business before selling the land to a nonmember of the group in a cash sale in which a $50,000 gain is realized. Which statement is correct?

Accepted Answer

A)  A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation. A $50,000 Sec. 1231 gain is included in consolidated taxable income when Subsidiary sells the land. 
B)  A $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income in the year Subsidiary sells the land (assuming no recapture of previously deducted Sec. 1231 losses must occur). 
C)  A $25,000 capital gain and a $50,000 Sec. 1231 gain are included in consolidated taxable income when Subsidiary sells the land. 
D)  None of the above are correct. 
A)  A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation. A $50,000 Sec. 1231 gain is included in consolidated taxable income when Subsidiary sells the land. 
B)  A $75,000 Sec. 1231 gain ($25,000 from Parent and $50,000 from Subsidiary) is included in consolidated taxable income in the year Subsidiary sells the land (assuming no recapture of previously deducted Sec. 1231 losses must occur). 
C)  A $25,000 capital gain and a $50,000 Sec. 1231 gain are included in consolidated taxable income when Subsidiary sells the land. 
D)  None of the above are correct.

Question 10

Ajax and Brindel Corporations have filed consolidated returns for several calendar years. Ajax acquires land for $60,000 on January 1 of last year. On September 1 of this year, Ajax sells the land to Brindel for $90,000. The basis and holding period for the land acquired by Brindel are:

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Basis } & \text { Holding Period Begins On } \
\hline \$ 90,000 & \text { January 2of last year } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Basis } & \text { Holding Period Begins On } \
\hline \$ 60,000 & \text { January 2 of last year } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Basis } & \text { Holding Period Begins On } \
\hline \$ 90,000 & \text { September } 2 \text { of this year } \
\hline
\end{array}$$ 
D)  none of the above 
A)  $$\begin{array} { | l | l | } 
\hline \text { Basis } & \text { Holding Period Begins On } \
\hline \$ 90,000 & \text { January 2of last year } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Basis } & \text { Holding Period Begins On } \
\hline \$ 60,000 & \text { January 2 of last year } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Basis } & \text { Holding Period Begins On } \
\hline \$ 90,000 & \text { September } 2 \text { of this year } \
\hline
\end{array}$$ 
D)  none of the above

Question 11

Identify which of the following statements is false.

Accepted Answer

A)  An intercompany item includes income reported by the seller on the providing of services by one group member to another group member and the gain/loss reported by the seller on the sale of property to another group member. 
B)  An intercompany transaction is a transaction that takes place between two corporations that are members of the same affiliated group immediately after the transaction. 
C)  Unused general business credit carryforwards, which originate in a consolidated return year, are absorbed in a FIFO manner, beginning with the earliest ending tax year. 
D)  All of the above are false. 
A)  An intercompany item includes income reported by the seller on the providing of services by one group member to another group member and the gain/loss reported by the seller on the sale of property to another group member. 
B)  An intercompany transaction is a transaction that takes place between two corporations that are members of the same affiliated group immediately after the transaction. 
C)  Unused general business credit carryforwards, which originate in a consolidated return year, are absorbed in a FIFO manner, beginning with the earliest ending tax year. 
D)  All of the above are false.

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

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.)

Accepted Answer

A)  100% 
B)  0% 
C)  50% 
D)  none of the above 
A)  100% 
B)  0% 
C)  50% 
D)  none of the above

Question 14

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.

Accepted Answer

A) True 
 B)False

Question 15

All of the stock of Hartz and Ryder Corporations is owned by Morgen. Hartz Corporation has been reporting
$150,000 of taxable income for each of the past five years. Ryder Corporation has been reporting $30,000 in NOLs for the same period, which totals $150,000. Approximately one- third of Hartz's profits come from sales to Ryder. Intercompany sales between Hartz and Ryder have increased during each of the last five years. What tax issues should Morgen consider with respect to his investments in Hartz and Ryder Corporations?

Accepted Answer

• What advantages would accrue if the Ha

Question 16

Identify which of the following statements is true.

Accepted Answer

A)  Capital loss carrybacks and carryforwards are all treated as short- term capital losses. 
B)  A member leaving an affiliated group cannot use capital loss carryovers that originated in one of its previous separate return years. 
C)  Rules for carryforward and carryback of a consolidated net capital loss and a consolidated NOL are the same with the exception of the carryforward period. 
D)  All of the above are false. 
A)  Capital loss carrybacks and carryforwards are all treated as short- term capital losses. 
B)  A member leaving an affiliated group cannot use capital loss carryovers that originated in one of its previous separate return years. 
C)  Rules for carryforward and carryback of a consolidated net capital loss and a consolidated NOL are the same with the exception of the carryforward period. 
D)  All of the above are false.

Question 17

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: $\begin{array}{|c|c|r|}
\hline\text { Corporation } & \text { Taxable Income } & \text { Taxable Income } \
& 2018 & 2019\\hline \text { Pants } & \$ 18,000 & \$ 12,000 \
\text { Skirt } & 9,000 & 8,000 \
\text { Zipper } & (17,000) & 20,000 \
\hline
\end{array}$ How much of the 2018 Zipper NOL be used to offset CTI in 2019?

Accepted Answer

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

Question 18

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. $\begin{array}{|l|l|l|l|} 
\hline & 2018 & 2019 & 2020 \
\hline \text { Parent } & 100 & 200 & 200 \
\hline \text { Subsidiary } & (500) & 100 & 100\\hline 
\end{array}$ How much of the Subsidiary 2018 loss can be utilized against consolidated net income in 2019?

Accepted Answer

A)  $300 
B)  $400 
C)  $240 
D)  $80 
A)  $300 
B)  $400 
C)  $240 
D)  $80

Question 19

Blitzer Corporation is the parent corporation of a 10- member group that has filed consolidated tax returns for a number of years. Last year, the group sold all the stock of Wolf Corporation to Jerry Jensen. This year, Wolf Corporation reported a $300,000 NOL. Wolf's taxable income while a group member averaged $200,000 annually for the past five years but is expected to be only $50,000 next year due to start- up costs that will be incurred with the introduction of a new product line. Profits are expected to increase in each succeeding year. What issues should Blitzer have considered when trying to value Wolf's NOL prior to its sale? What tax issues should Wolf now consider when deciding how to use its NOL?

Accepted Answer

• What alternatives exist for using the

Question 20

What are the five steps in calculating consolidated taxable income?

Accepted Answer

Generally, the five steps are:
1) Comput

Identify which of the following statements is false.

A consolidated return's tax liability is owed by

Which of the following events is an intercompany transaction?

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,

How do intercompany transactions affect the calculation of capital gains/losses?

Define intercompany transactions and explain the two types of transactions.

Ajax and Brindel Corporations have filed consolidated returns for several calendar years. Ajax acquires land for $60,000 on January 1 of last year. On September 1 of this year, Ajax sells the land to Brindel for $90,000. The basis and holding period for the land acquired by Brindel are:

Identify which of the following statements is false.

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.

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.

Identify which of the following statements is true.

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. 2018 2019 2020 Parent 100 200 200 Subsidiary (500) 100 100 How much of the Subsidiary 2018 loss can be utilized against consolidated net income in 2019?

What are the five steps in calculating consolidated taxable income?

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 false.

A consolidated return's tax liability is owed by

Which of the following events is an intercompany transaction?

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,

How do intercompany transactions affect the calculation of capital gains/losses?

Define intercompany transactions and explain the two types of transactions.

Ajax and Brindel Corporations have filed consolidated returns for several calendar years. Ajax acquires land for $60,000 on January 1 of last year. On September 1 of this year, Ajax sells the land to Brindel for $90,000. The basis and holding period for the land acquired by Brindel are:

Identify which of the following statements is false.

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.

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.

Identify which of the following statements is true.

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. 2018 2019 2020 Parent 100 200 200 Subsidiary (500) 100 100 How much of the Subsidiary 2018 loss can be utilized against consolidated net income in 2019?

What are the five steps in calculating consolidated taxable income?

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