Question 1

The foreign tax credit of a consolidated group can be greater than the sum of the credits of the group members when filing separately.

Accepted Answer

A) True 
 B)False

Question 2

List some of the non-tax reasons that groups of corporations form conglomerates and may be eligible also to file consolidated Federal income tax returns.

Accepted Answer

Conglomerates are fo

Question 3

How must the IRS collect the liability for Federal taxes from among a consolidated group?

Accepted Answer

A)  Against the parent of the group. 
B)  According to the members' current internal tax-sharing agreement. 
C)  Against the member of the group that generated the tax. 
D)  No particular order of collection is prescribed by IRS rules. 
A)  Against the parent of the group. 
B)  According to the members' current internal tax-sharing agreement. 
C)  Against the member of the group that generated the tax. 
D)  No particular order of collection is prescribed by IRS rules.

Question 4

Gold and Bronze elect to form a Federal consolidated group. Gold, the parent entity, uses a calendar tax year, while Bronze's tax year ends on March 31. Which tax year(s) does the new consolidated group use?

Accepted Answer

Affiliates must switch to the

Question 5

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
-Dividends received deduction

Accepted Answer

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

Question 6

Consolidated group members each are jointly and severally liable for the entire consolidated income tax liability.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a requirement that must be met before a group files a consolidated return?

Accepted Answer

A)  None of the corporations can be ineligible under the Code to file on a consolidated basis with the others. 
B)  All of the corporations must be members of an affiliated group. 
C)  The group members must share the same inventory accounting method. 
D)  The group members must share a common tax year end. 
A)  None of the corporations can be ineligible under the Code to file on a consolidated basis with the others. 
B)  All of the corporations must be members of an affiliated group. 
C)  The group members must share the same inventory accounting method. 
D)  The group members must share a common tax year end.

Question 8

A Federal consolidated group reports a net operating loss for the year. How is this amount allocated to the various group members? Why is this allocation important?

Accepted Answer

Each year, the total consolidated loss i

Question 9

ParentCo owned 100% of SubCo for the entire year. ParentCo uses the accrual method of tax accounting, whereas SubCo uses the cash method. During the year, SubCo sold raw materials to ParentCo for $35,000 under a contract that requires no payment to SubCo until the following year.
Exclusive of this transaction, ParentCo had income for the year of $30,000, and SubCo had income of $50,000. The group's consolidated taxable income for the year was:

Accepted Answer

A)  $165,000. 
B)  $150,000. 
C)  $115,000. 
D)  $80,000. 
A)  $165,000. 
B)  $150,000. 
C)  $115,000. 
D)  $80,000.

Question 10

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
-Charitable contributions

Accepted Answer

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

Question 11

Consider AB, a brother-sister group of U.S. corporations, and CD, a parent-subsidiary group of U.S. corporations. Which of these could comprise a controlled group? An affiliated group?

Accepted Answer

Either group could be a contro

Question 12

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
-Domestic production activities deduction

Accepted Answer

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

Question 13

The U.S. states apply different rules in treating Federal consolidated groups for corporate income tax purposes. Describe at least three different approaches that the states currently use to allow or restrict conglomerates' use of consolidations.

Accepted Answer

Various states apply a number of differe

Question 14

Most of the Federal consolidated income tax return rules are found in detailed sections of the tax Regulations.

Accepted Answer

A) True 
 B)False

Question 15

ParentCo and SubCo recorded the following items of income and deduction for the current tax year.   Compute ParentCo and SubCo's consolidated taxable income or loss.

Accepted Answer

A)  $95,000 
B)  $99,000 
C)  $104,400 
D)  $116,000 
E)  $120,000 
A)  $95,000 
B)  $99,000 
C)  $104,400 
D)  $116,000 
E)  $120,000

Question 16

The Rack, Spill, and Ton Corporations file Federal income tax returns on a consolidated basis. The group's tax return currently is under audit. Under a valid tax-sharing agreement, each corporation is liable for one-third of the group's consolidated tax liability. The affiliates have agreed with the auditor that the group's unpaid liability for the year is $90,000. Because of an incorrect tax return position, another $3,000 in interest and an $18,000 penalty is attributable solely to Ton.
​
At present, only Rack is solvent and has the cash with which to make such a tax payment. What is the maximum amount for which the government could be successful in forcing Rack to satisfy the outstanding liabilities of the consolidated group?

Accepted Answer

A)  $0 
B)  $90,000 
C)  $93,000 
D)  $108,000 
E)  $111,000 
A)  $0 
B)  $90,000 
C)  $93,000 
D)  $108,000 
E)  $111,000

Question 17

The consolidated return rules are designed to allow a tax-neutral means by which to elect to file on a consolidated basis.

Accepted Answer

A) True 
 B)False

Question 18

When the parent acquires 51% of a subsidiary U.S. corporation, the subsidiary can join the consolidated financial statements and the consolidated tax return of the parent.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not generally a disadvantage of filing Federal corporate income tax returns on a consolidated basis?

Accepted Answer

A)  Net capital losses from one affiliate can offset the capital gains from another. This can reduce the tax liabilities of the group as a whole. 
B)  Realized losses from transactions between affiliates are not recognized immediately. 
C)  Compliance costs usually are higher when a consolidation election is in effect. 
D)  The election generally is binding for future tax years. 
A)  Net capital losses from one affiliate can offset the capital gains from another. This can reduce the tax liabilities of the group as a whole. 
B)  Realized losses from transactions between affiliates are not recognized immediately. 
C)  Compliance costs usually are higher when a consolidation election is in effect. 
D)  The election generally is binding for future tax years.

Question 20

When a consolidated NOL is generated, each affiliate is allocated a share of the loss.

Accepted Answer

A) True 
 B)False

The foreign tax credit of a consolidated group can be greater than the sum of the credits of the group members when filing separately.

List some of the non-tax reasons that groups of corporations form conglomerates and may be eligible also to file consolidated Federal income tax returns.

How must the IRS collect the liability for Federal taxes from among a consolidated group?

Gold and Bronze elect to form a Federal consolidated group. Gold, the parent entity, uses a calendar tax year, while Bronze's tax year ends on March 31. Which tax year(s) does the new consolidated group use?

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 -Dividends received deduction

Consolidated group members each are jointly and severally liable for the entire consolidated income tax liability.

Which of the following is not a requirement that must be met before a group files a consolidated return?

A Federal consolidated group reports a net operating loss for the year. How is this amount allocated to the various group members? Why is this allocation important?

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 -Charitable contributions

Consider AB, a brother-sister group of U.S. corporations, and CD, a parent-subsidiary group of U.S. corporations. Which of these could comprise a controlled group? An affiliated group?

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 -Domestic production activities deduction

The U.S. states apply different rules in treating Federal consolidated groups for corporate income tax purposes. Describe at least three different approaches that the states currently use to allow or restrict conglomerates' use of consolidations.

Most of the Federal consolidated income tax return rules are found in detailed sections of the tax Regulations.

ParentCo and SubCo recorded the following items of income and deduction for the current tax year. Compute ParentCo and SubCo's consolidated taxable income or loss.

The consolidated return rules are designed to allow a tax-neutral means by which to elect to file on a consolidated basis.

When the parent acquires 51% of a subsidiary U.S. corporation, the subsidiary can join the consolidated financial statements and the consolidated tax return of the parent.

Which of the following is not generally a disadvantage of filing Federal corporate income tax returns on a consolidated basis?

When a consolidated NOL is generated, each affiliate is allocated a share of the loss.

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

The foreign tax credit of a consolidated group can be greater than the sum of the credits of the group members when filing separately.

List some of the non-tax reasons that groups of corporations form conglomerates and may be eligible also to file consolidated Federal income tax returns.

How must the IRS collect the liability for Federal taxes from among a consolidated group?

Gold and Bronze elect to form a Federal consolidated group. Gold, the parent entity, uses a calendar tax year, while Bronze's tax year ends on March 31. Which tax year(s) does the new consolidated group use?

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 -Dividends received deduction

Consolidated group members each are jointly and severally liable for the entire consolidated income tax liability.

Which of the following is not a requirement that must be met before a group files a consolidated return?

A Federal consolidated group reports a net operating loss for the year. How is this amount allocated to the various group members? Why is this allocation important?

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 -Charitable contributions

Consider AB, a brother-sister group of U.S. corporations, and CD, a parent-subsidiary group of U.S. corporations. Which of these could comprise a controlled group? An affiliated group?

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 -Domestic production activities deduction

The U.S. states apply different rules in treating Federal consolidated groups for corporate income tax purposes. Describe at least three different approaches that the states currently use to allow or restrict conglomerates' use of consolidations.

Most of the Federal consolidated income tax return rules are found in detailed sections of the tax Regulations.

ParentCo and SubCo recorded the following items of income and deduction for the current tax year. Compute ParentCo and SubCo's consolidated taxable income or loss.

The consolidated return rules are designed to allow a tax-neutral means by which to elect to file on a consolidated basis.

When the parent acquires 51% of a subsidiary U.S. corporation, the subsidiary can join the consolidated financial statements and the consolidated tax return of the parent.

Which of the following is not generally a disadvantage of filing Federal corporate income tax returns on a consolidated basis?

When a consolidated NOL is generated, each affiliate is allocated a share of the loss.

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