Exam 8: Consolidated Tax Returns

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?

P and S comprise an affiliated group that filed consolidated returns in 2018, 2019 and 2020. They report the following for 2018, 2019 and 2020. Taxable Income How much of the Subsidiary 2018 loss can be utilized against consolidated net income in 2019?

Mariano owns all of Alpha Corporation, which owns 100% of Beta Corporation's single class of stock. On January 1, Alpha and Beta Corporations report a consolidated NOL carryover from prior years. What is the maximum percentage of Alpha Corporation's single class of stock that Mariano can sell to a single shareholder without triggering the Sec. 382 loss limitation?

P and S are members of an affiliated group that has filed consolidated tax returns for a number of years. The sale of inventory by P that was acquired from S in an intercompany transaction outside the affiliated group triggers the recognition of gain by S.

How do intercompany transactions affect the calculation of capital gains/losses?

Which of the following intercompany transactions creates temporary book/tax differences when a parent corporation owns 100% of a subsidiary's stock and the companies file a consolidated return?

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

A separate return year is a corporation's tax year for which it files a separate tax return or files a consolidated tax return with another affiliated group.

Last year, Trix Corporation acquired 100% of Track Corporation. The acquisition occurred on July 1, which was five months after Track's creation. The corporations filed separate returns that year and have filed consolidated returns since then. The group results for the years, excluding the NOL deduction, are shown below. Which of the following statements is incorrect?