Question 1

Which of the following statements is true with regard to intercompany transactions?

Accepted Answer

A)  An intercompany transaction is eliminated from consolidated taxable income. 
B)  All intercompany gains are recognized, but losses must be deferred. 
C)  A cash sale of a business asset by the purchasing member to an acquirer outside of the group triggers immediate recognition of the gain or loss. 
D)  The gain or loss on an intercompany transaction is deferred for up to 10 years after which it is recognized. 
A)  An intercompany transaction is eliminated from consolidated taxable income. 
B)  All intercompany gains are recognized, but losses must be deferred. 
C)  A cash sale of a business asset by the purchasing member to an acquirer outside of the group triggers immediate recognition of the gain or loss. 
D)  The gain or loss on an intercompany transaction is deferred for up to 10 years after which it is recognized.

Question 2

Describe the general computational method used by a Federal consolidated group in computing taxable income.

Accepted Answer

Consolidated taxable income is determine

Question 3

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.

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 4

ParentCo owns all of the stock of both SubOne and SubTwo. List three "intercompany transactions" that might occur among the three members of the consolidated filing group.

Accepted Answer

Illustrative intercompany transactions i

Question 5

The consolidated net operating loss of the Parent Group includes all of the following except the:

Accepted Answer

A)  Parent's operating income/loss. 
B)  Parent's charitable contributions. 
C)  Parent's dividends received deduction. 
D)  Subsidiary's operating income/loss. 
A)  Parent's operating income/loss. 
B)  Parent's charitable contributions. 
C)  Parent's dividends received deduction. 
D)  Subsidiary's operating income/loss.

Question 6

In computing a group's consolidated taxable income, the first step is to:

Accepted Answer

A)  Compute the taxable income amounts for each affiliate on a standalone basis. 
B)  Obtain IRS permission to file on a consolidated basis for another tax year. 
C)  Eliminate the results of all intercompany transactions for the tax year. 
D)  Compute the allowable group NOL carryforward. 
A)  Compute the taxable income amounts for each affiliate on a standalone basis. 
B)  Obtain IRS permission to file on a consolidated basis for another tax year. 
C)  Eliminate the results of all intercompany transactions for the tax year. 
D)  Compute the allowable group NOL carryforward.

Question 7

JuniorCo sells an asset to SeniorCo at a realized loss. That loss is not recognized by the group in the year of the sale, because of the:

Accepted Answer

A)  Wash sale rule. 
B)  Transfer pricing rules. 
C)  Matching rule. 
D)  Acceleration rule. 
E)  None of these. The group deducts the loss. 
A)  Wash sale rule. 
B)  Transfer pricing rules. 
C)  Matching rule. 
D)  Acceleration rule. 
E)  None of these. The group deducts the loss.

Question 8

An example of an intercompany transaction is the use of the trademarks of the parent corporation by a subsidiary for an arm's length licensing fee.

Accepted Answer

A) True 
 B)False

Question 9

Match each of the following terms with the appropriate description in the context of a consolidated Federal income tax return.
-Gain deferral on intercompany transactions.

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 10

Each member of a consolidated group must use the same tax year-end, and all of the members must use the same tax accounting methodse.g., LIFO or FIFO).

Accepted Answer

A) True 
 B)False

Question 11

Subsidiary holds an allocated net operating loss NOL) when it leaves the Parent consolidated group. As a result:

Accepted Answer

A)  The group keeps Subsidiary's allocated loss. 
B)  Subsidiary takes its allocated NOL and uses it on subsequent separate tax returns. 
C)  The loss is suspended for five years in case Subsidiary rejoins the group; then Parent can use it. 
D)  The loss is suspended for five years in case Subsidiary rejoins the group. At that time, Subsidiary uses the loss on its separate return. 
A)  The group keeps Subsidiary's allocated loss. 
B)  Subsidiary takes its allocated NOL and uses it on subsequent separate tax returns. 
C)  The loss is suspended for five years in case Subsidiary rejoins the group; then Parent can use it. 
D)  The loss is suspended for five years in case Subsidiary rejoins the group. At that time, Subsidiary uses the loss on its separate return.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

The consolidated income tax return rules apply only for Federal tax purposes. Financial accounting rules can be quite different from the corresponding tax rules, but the tax professional should be familiar with both sets of requirements. Describe the major differences between the book and tax treatment for the conglomerate's reporting of:

a. The ownership levels required to consolidate.
b. Goodwill.
c. The entities included on the report.

Accepted Answer

attained. Tax consolidation is elective

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  $81,000 
B)  $88,000 
C)  $90,000 
D)  $90,500 
A)  $81,000 
B)  $88,000 
C)  $90,000 
D)  $90,500

Question 17

Forming a Federal consolidated tax return group is a discretionary action by eligible affiliates. List several tax attributes and situations that might make a subsidiary an attractive partner for a parent corporation on a consolidated return.

Accepted Answer

Taxpayers should optimize their overall

Question 18

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 19

Consolidated estimated tax payments must begin for the first, second, etc.) tax year after the group's election.

Accepted Answer

The answer of Consolidated estimated tax payments must begin for...

Question 20

All members of an affiliated group have and liability for each other's Federal income tax liabilities.

Accepted Answer

The answer of All members of an affiliated group have...

Which of the following statements is true with regard to intercompany transactions?

Describe the general computational method used by a Federal consolidated group in computing taxable income.

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.

ParentCo owns all of the stock of both SubOne and SubTwo. List three "intercompany transactions" that might occur among the three members of the consolidated filing group.

The consolidated net operating loss of the Parent Group includes all of the following except the:

In computing a group's consolidated taxable income, the first step is to:

JuniorCo sells an asset to SeniorCo at a realized loss. That loss is not recognized by the group in the year of the sale, because of the:

An example of an intercompany transaction is the use of the trademarks of the parent corporation by a subsidiary for an arm's length licensing fee.

Match each of the following terms with the appropriate description in the context of a consolidated Federal income tax return. -Gain deferral on intercompany transactions.

Each member of a consolidated group must use the same tax year-end, and all of the members must use the same tax accounting methodse.g., LIFO or FIFO).

Subsidiary holds an allocated net operating loss NOL) when it leaves the Parent consolidated group. As a result:

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

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

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

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

Forming a Federal consolidated tax return group is a discretionary action by eligible affiliates. List several tax attributes and situations that might make a subsidiary an attractive partner for a parent corporation on a consolidated return.

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

Consolidated estimated tax payments must begin for the first, second, etc.) tax year after the group's election.

All members of an affiliated group have and liability for each other's Federal income tax liabilities.

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Taxation of International Transactions

Partnerships: Formation, Operations, 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 statements is true with regard to intercompany transactions?

Describe the general computational method used by a Federal consolidated group in computing taxable income.

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.

ParentCo owns all of the stock of both SubOne and SubTwo. List three "intercompany transactions" that might occur among the three members of the consolidated filing group.

The consolidated net operating loss of the Parent Group includes all of the following except the:

In computing a group's consolidated taxable income, the first step is to:

JuniorCo sells an asset to SeniorCo at a realized loss. That loss is not recognized by the group in the year of the sale, because of the:

An example of an intercompany transaction is the use of the trademarks of the parent corporation by a subsidiary for an arm's length licensing fee.

Match each of the following terms with the appropriate description in the context of a consolidated Federal income tax return. -Gain deferral on intercompany transactions.

Each member of a consolidated group must use the same tax year-end, and all of the members must use the same tax accounting methodse.g., LIFO or FIFO).

Subsidiary holds an allocated net operating loss NOL) when it leaves the Parent consolidated group. As a result:

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

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

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

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

Forming a Federal consolidated tax return group is a discretionary action by eligible affiliates. List several tax attributes and situations that might make a subsidiary an attractive partner for a parent corporation on a consolidated return.

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

Consolidated estimated tax payments must begin for the first, second, etc.) tax year after the group's election.

All members of an affiliated group have and liability for each other's Federal income tax liabilities.

Understanding and Working With the Federal Tax Law

The Deduction for Qualified Business Income for Pass-Through Entities

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Earnings and Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Taxation of International Transactions

Partnerships: Formation, Operations, 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