Exam 8: Consolidated Tax Returns

Parent and Subsidiary Corporations form an affiliated group. In 2018, the initial year of operation, P and Subsidiary filed separate returns. In 2019, the group files a consolidated tax return. The results 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?

Which of the following is not reported by an affiliated group on a consolidated basis?

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

The Alto- Baxter affiliated group filed a consolidated return for the first time last year. The group does not come under the "large" corporation rules. For last year, the group reports a tax liability of $60,000. Cooper Corporation has a $30,000 tax liability last year. This year, the Alto- Baxter affiliated group purchased all of the Cooper stock. This year, the Alto- Baxter- Cooper group reports a $110,000 consolidated tax liability. To avoid penalties for the current year, the group must make timely estimated tax payments of how much during the year?

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.

Parent Corporation sells land (a capital asset) to Subsidiary Corporation in an intercompany transaction, recognizing a $25,000 gain. Subsidiary holds the land as an investment for five years before selling the land to a nonmember of the group on an installment basis in a sale in which a $50,000 gain is realized. The sales proceeds are collectible in four equal installments with an appropriate interest amount being charged to the purchaser. Which statement is correct?

Identify which of the following statements is true.

Explain the requirements a group of corporations must meet in order to elect to file a consolidated return.

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 What is the affiliated group's consolidated regular tax liability?

Identify which of the following statements is true.

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

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 machin

Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return.

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 Bluebird's income will be included in the consolidated return? (Assume all months have 30 days.)

Identify which of the following statements is true.

Marietta and Alpharetta Corporation, two accrual method of accounting corporations that use the calendar year as their tax year, have filed consolidated tax returns for a number of years. Alpharetta Corporation, a 100% owned subsidiary of Marietta, is transferring a patent, equipment, and working capital to newly created Georgia Corporation in exchange for 100% of its stock. In 2018, the corporation will begin to produce parts for the computer industry. Georgia Corporation expects to incur organizational expenditures of $10,000 and start- up expenditures of $60,000. What tax issues should Georgia Corporation consider with respect to the selection of its overall accounting method, inventory method, and tax year, and the proper reporting of its organizational and start- up expenditures?

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

Jason and Jon Corporations are members of an affiliated group whose taxable incomes (before dividends) are $90,000 and $100,000, respectively. Jason Corporation owns all of the Jon stock. Jon Corporation received a dividend from a less- than- 20%- owned corporation of $10,000 and $25,000 from a 100%- owned nonconsolidated insurance company. Jon Corporation distributed a $40,000 dividend to Jason Corporation. Jason Corporation also received dividends from a 25%- owned corporation of $20,000. The consolidated dividends- received deduction for federal income tax purposes is what?

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.