Question 1

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

Accepted Answer

A)  A U.S. C corporation that files on a separate basis for its state income tax returns. 
B)  The charitable foundation of a U.S. C corporation. 
C)  The liquidating trust of a U.S. C corporation. 
D)  A wholly owned French subsidiary of a U.S. C corporation. 
A)  A U.S. C corporation that files on a separate basis for its state income tax returns. 
B)  The charitable foundation of a U.S. C corporation. 
C)  The liquidating trust of a U.S. C corporation. 
D)  A wholly owned French subsidiary of a U.S. C corporation.

Question 2

Match each of the following items with the appropriate description, indicating whether the item increases or decreases the parent's basis in the stock of a subsidiary
-Member's operating gains/profits

Accepted Answer

A) Increases stock basis of subsidiary 
B) Decreases stock basis of subsidiary 
C) No effect on stock basis of subsidiary 
A) Increases stock basis of subsidiary 
B) Decreases stock basis of subsidiary 
C) No effect on stock basis of subsidiary

Question 3

Match each of the following items with the appropriate description, indicating whether the item is computed on a group basis on a consolidated tax return
-Net operating loss

Accepted Answer

A) Group item 
B) Not a group item 
A) Group item 
B) Not a group item

Question 4

If there is a balance in the excess loss account when a subsidiary's stock is sold, the balance is recognized as ____________________ gain/income.

Accepted Answer

The answer of If there is a balance in the...

Question 5

ParentCo and SubCo recorded the following items of income and deduction for the current tax year.   Compute ParentCo and SubCo's taxable income or loss computed on a separate basis.
ParentCo SubCo

Accepted Answer

A)  $78,300 $30,600 
B)  $80,000 $33,000 
C)  $81,000 $33,000 
D)  $82,800 $30,600 
E)  $82,800 $33,000 
A)  $78,300 $30,600 
B)  $80,000 $33,000 
C)  $81,000 $33,000 
D)  $82,800 $30,600 
E)  $82,800 $33,000

Question 6

Giant Ltd. owns 100% of the stock of Middle Corporation. BottomCorp is owned 60% by Giant and 40% by Middle. Giant's Federal consolidated income tax return includes both Middle and Bottom.

Accepted Answer

A) True 
 B)False

Question 7

A subsidiary corporation must leave the consolidated group if it is restructured as an LLC.

Accepted Answer

A) True 
 B)False

Question 8

The losses of a consolidated group member are subject to both the SRLY rules and a § 382 limitation. When both limitations apply, the § 382 restrictions override the SRLY rules for this affiliate.

Accepted Answer

A) True 
 B)False

Question 9

Deferring recognition of an intercompany gain is one ____________________ (advantage/disadvantage) of electing to file consolidated returns.

Accepted Answer

The answer of Deferring recognition of an intercompany gain is...

Question 10

In the year that the group terminates its consolidation election, a consolidated group's deferred gain from an intercompany asset sale between affiliates is recognized in full, under the ____________________ rule.

Accepted Answer

The answer of In the year that the group terminates...

Question 11

The Harris consolidated group reports a net operating loss (NOL) for the year. The tax law works to:

Accepted Answer

A)  Allow unused charitable contributions a 20-year carryforward. 
B)  Disallow any carrybacks of NOL deductions. 
C)  Keep the consolidated group from benefiting when the election to consolidate is motivated chiefly by tax reduction strategies. 
D)  All of the above statements describe effects of the consolidated return rules. 
A)  Allow unused charitable contributions a 20-year carryforward. 
B)  Disallow any carrybacks of NOL deductions. 
C)  Keep the consolidated group from benefiting when the election to consolidate is motivated chiefly by tax reduction strategies. 
D)  All of the above statements describe effects of the consolidated return rules.

Question 12

Which of the following items is not computed on a consolidated basis?

Accepted Answer

A)  Dividends received deduction. 
B)  Cost recovery deduction. 
C)  Charitable contributions. 
D)  Net capital losses. 
A)  Dividends received deduction. 
B)  Cost recovery deduction. 
C)  Charitable contributions. 
D)  Net capital losses.

Question 13

Keep Corporation joined an affiliated group by merger in 2016. The group generated a consolidated 2016 NOL, and Keep's share of the loss was $50,000. Lacking an election by the parent to the contrary, Keep can carry the loss back to its separate 2014 return, and the parent can claim a tax refund.

Accepted Answer

A) True 
 B)False

Question 14

In computing consolidated taxable income, capital gains and losses are removed from the taxable incomes of the group members and determined on a group basis.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

Accepted Answer

A)  Professional sports team operating as a limited partnership. 
B)  Japanese corporation engaged in multinational operations, including two-thirds of its activities in the U.S. 
C)  Japanese corporation engaged in multinational operations, including one-third of its activities in the U.S. 
D)  U.S. corporation engaged in the nuclear energy industry. 
A)  Professional sports team operating as a limited partnership. 
B)  Japanese corporation engaged in multinational operations, including two-thirds of its activities in the U.S. 
C)  Japanese corporation engaged in multinational operations, including one-third of its activities in the U.S. 
D)  U.S. corporation engaged in the nuclear energy industry.

Question 16

Calendar year ParentCo purchased all of the stock of SubCo on January 1, 2013, for $500,000. SubCo produced a loss for 2013 of $150,000 and distributed cash of $25,000 to ParentCo. In 2014, SubCo generated a loss of $450,000; in 2015, it recognized net income of $90,000. What is ParentCo's capital gain or (loss) if it sells all of its SubCo stock to a nongroup member on January 1, 2016, for $150,000?

Accepted Answer

A)  $185,000 
B)  $150,000 
C)  ($35,000) 
D)  ($535,000) 
E)  All gain/loss is ordinary when subsidiary stock is sold. 
A)  $185,000 
B)  $150,000 
C)  ($35,000) 
D)  ($535,000) 
E)  All gain/loss is ordinary when subsidiary stock is sold.

Question 17

A Federal consolidated tax return group can apply the "relative taxable income" method as a means to apportion the tax liabilities of the members among the affiliates.

Accepted Answer

A) True 
 B)False

Question 18

A consolidated Federal income tax group must meet the eligibility requirements of the Regulations on the first day of the first year for which the election to consolidate is effective, and then on the last day of every succeeding tax year.

Accepted Answer

A) True 
 B)False

Question 19

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return
-Offsetting gains against other members' losses

Accepted Answer

A) Advantage of consolidating 
B) Disadvantage of consolidating 
C) Neither an advantage nor a disadvantage 
A) Advantage of consolidating 
B) Disadvantage of consolidating 
C) Neither an advantage nor a disadvantage

Question 20

ParentCo and SubCo had the following items of income and deduction for the current year.   Compute ParentCo and SubCo's taxable income or loss computed on a separate basis.
ParentCo SubCo

Accepted Answer

A)  $85,000 $5,000 
B)  $85,000 $3,000 
C)  $85,500 $5,000 
D)  $85,500 $3,000 
E)  None of the above. 
A)  $85,000 $5,000 
B)  $85,000 $3,000 
C)  $85,500 $5,000 
D)  $85,500 $3,000 
E)  None of the above.

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

Match each of the following items with the appropriate description, indicating whether the item increases or decreases the parent's basis in the stock of a subsidiary -Member's operating gains/profits

Match each of the following items with the appropriate description, indicating whether the item is computed on a group basis on a consolidated tax return -Net operating loss

If there is a balance in the excess loss account when a subsidiary's stock is sold, the balance is recognized as ____________________ gain/income.

ParentCo and SubCo recorded the following items of income and deduction for the current tax year. Compute ParentCo and SubCo's taxable income or loss computed on a separate basis. ParentCo SubCo

Giant Ltd. owns 100% of the stock of Middle Corporation. BottomCorp is owned 60% by Giant and 40% by Middle. Giant's Federal consolidated income tax return includes both Middle and Bottom.

A subsidiary corporation must leave the consolidated group if it is restructured as an LLC.

The losses of a consolidated group member are subject to both the SRLY rules and a § 382 limitation. When both limitations apply, the § 382 restrictions override the SRLY rules for this affiliate.

Deferring recognition of an intercompany gain is one ____________________ (advantage/disadvantage) of electing to file consolidated returns.

In the year that the group terminates its consolidation election, a consolidated group's deferred gain from an intercompany asset sale between affiliates is recognized in full, under the ____________________ rule.

The Harris consolidated group reports a net operating loss (NOL) for the year. The tax law works to:

Which of the following items is not computed on a consolidated basis?

Keep Corporation joined an affiliated group by merger in 2016. The group generated a consolidated 2016 NOL, and Keep's share of the loss was $50,000. Lacking an election by the parent to the contrary, Keep can carry the loss back to its separate 2014 return, and the parent can claim a tax refund.

In computing consolidated taxable income, capital gains and losses are removed from the taxable incomes of the group members and determined on a group basis.

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

A Federal consolidated tax return group can apply the "relative taxable income" method as a means to apportion the tax liabilities of the members among the affiliates.

A consolidated Federal income tax group must meet the eligibility requirements of the Regulations on the first day of the first year for which the election to consolidate is effective, and then on the last day of every succeeding tax year.

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return -Offsetting gains against other members' losses

ParentCo and SubCo had the following items of income and deduction for the current year. Compute ParentCo and SubCo's taxable income or loss computed on a separate basis. ParentCo SubCo

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 8: Consolidated Tax Returns

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

Match each of the following items with the appropriate description, indicating whether the item increases or decreases the parent's basis in the stock of a subsidiary -Member's operating gains/profits

Match each of the following items with the appropriate description, indicating whether the item is computed on a group basis on a consolidated tax return -Net operating loss

If there is a balance in the excess loss account when a subsidiary's stock is sold, the balance is recognized as ____________________ gain/income.

ParentCo and SubCo recorded the following items of income and deduction for the current tax year. Compute ParentCo and SubCo's taxable income or loss computed on a separate basis. ParentCo SubCo

Giant Ltd. owns 100% of the stock of Middle Corporation. BottomCorp is owned 60% by Giant and 40% by Middle. Giant's Federal consolidated income tax return includes both Middle and Bottom.

A subsidiary corporation must leave the consolidated group if it is restructured as an LLC.

The losses of a consolidated group member are subject to both the SRLY rules and a § 382 limitation. When both limitations apply, the § 382 restrictions override the SRLY rules for this affiliate.

Deferring recognition of an intercompany gain is one ____________________ (advantage/disadvantage) of electing to file consolidated returns.

In the year that the group terminates its consolidation election, a consolidated group's deferred gain from an intercompany asset sale between affiliates is recognized in full, under the ____________________ rule.

The Harris consolidated group reports a net operating loss (NOL) for the year. The tax law works to:

Which of the following items is not computed on a consolidated basis?

Keep Corporation joined an affiliated group by merger in 2016. The group generated a consolidated 2016 NOL, and Keep's share of the loss was $50,000. Lacking an election by the parent to the contrary, Keep can carry the loss back to its separate 2014 return, and the parent can claim a tax refund.

In computing consolidated taxable income, capital gains and losses are removed from the taxable incomes of the group members and determined on a group basis.

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

A Federal consolidated tax return group can apply the "relative taxable income" method as a means to apportion the tax liabilities of the members among the affiliates.

A consolidated Federal income tax group must meet the eligibility requirements of the Regulations on the first day of the first year for which the election to consolidate is effective, and then on the last day of every succeeding tax year.

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return -Offsetting gains against other members' losses

ParentCo and SubCo had the following items of income and deduction for the current year. Compute ParentCo and SubCo's taxable income or loss computed on a separate basis. ParentCo SubCo

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters