Exam 8: Consolidated Tax Returns

Parent and Subsidiary Corporations form an affiliated group. In 2018, the initial year of operation, Parent and Subsidiary filed separate returns. In 2019, the group files a consolidated return. Taxable Income How much of the Subsidiary loss can be carried back to last year?

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

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

What are the differences between a controlled group and an affiliated group?

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?

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?

Toby Corporation owns 85% of James Corporation's single class of stock and 35% of Mony Corporation's single class of stock. James Corporation owns 45% of Mony's stock. The remainder of James and Mony's stock is owned by 80 individual shareholders. Are the corporations part of an affiliated group, and can they elect to file a consolidated tax return?

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

Penish and Sagen Corporations have filed consolidated tax returns for several calendar years. At the close of business on September 30, 2018, Penish Corporation sells all of its Sagen stock to June. What are the tax consequences to each corporation?

Identify which of the following statements is true.

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: 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?

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.

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

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?

Blair and Cannon Corporations are 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. Which of the following statements is correct?

Define intercompany transactions and explain the two types of transactions.

Identify which of the following statements is true.

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: How much of the 2018 Zipper NOL be used to offset CTI in 2019?

Identify which of the following statements is true.

Toby owns all of the single class of stock of James and Mony Corporations. James Corporation owns all of Volt Corporation's stock. Mony owns all of Wegnin Corporation. Mony and Wegnin Corporations are foreign corporations. Toby, James, and Volt are domestic corporations. Are the corporations part of an affiliated group?