Exam 8: Consolidated Tax Returns

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. -Increase in affiliate's E & P

A Federal consolidated filing group aggregates its separate charitable contributions for the tax year, deductions for which then are subject to an annual limitation of 10% of consolidated taxable income.

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 is computed on a group basis on a consolidated tax return. -Interest income from Detroit School District bonds

Match each of the following items with the appropriate description, indicating whether the item's treatment for financial accounting and Federal income tax purposes is the same or not. -Sales amounts (after returns and allowances) are combined in the consolidation process.

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

Which of the following potentially is a disadvantage of electing to file a Federal consolidated corporate income tax return?

One of the motivations for the consolidated return rules is to discourage conglomerates from trafficking in the deductible ____________________ of other entities.

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 terms with the appropriate description, in the context of a consolidated Federal income tax return. -Tax treatment of operating losses when the basis of the payor's stock is zero

In computing consolidated E & P, a negative adjustment is allowed for the group's disallowed travel and entertainment expenditures.

Gold, Silver, and Tin are the affiliates in a Federal consolidated group. Each of the members conducts traditional manufacturing activities. Is a domestic production activities deduction (DPAD) available to the group members? Explain.

The consolidated return rules combine the members' transactions involving ____________________ items (e.g., § 1231 gain/loss) when computing consolidated taxable income.

If one member sells an asset with a realized gain to another member of an affiliated group, any gain on the transaction is not recognized at that time; such a deferral applies the ____________________ rule.

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 loss

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.

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return. -Binding nature of election over multiple tax years

All affiliates joining in a newly formed consolidated return must consent to the election on Form 1122, as attached to the Form 1120 for the group.

The domestic production activities deduction (DPAD) of the affiliates is an example of an item that is computed on a ____________________ basis on a Federal corporate income tax consolidated return.

A consolidated Federal income tax return may be the product of a merger of the affiliates, or another corporate combination.