Exam 8: Consolidated Tax Returns

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. Which of the following statements is incorrect?

Which of the following events is an intercompany transaction?

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?

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?

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: Which of following statements is incorrect?

Identify which of the following statements is true.

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

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?

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

What are the five steps in calculating consolidated taxable income?

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:

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

Identify which of the following statements is true.

Which of the following corporations is entitled to join in a consolidated tax return without making a special election?

Identify which of the following statements is true.

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

Identify which of the following statements is true.

Identify which of the following statements is false.

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?

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 How much of Subsidiary's loss can be carried back to last year?