Question 1

Identify which of the following statements is true.

Accepted Answer

A) Rules for carryforward and carryback of a consolidated net capital loss and a consolidated NOL are the same with the exception of the carryforward period. 
B) Capital loss carrybacks and carryforwards are all treated as short-term capital losses. 
C) A member leaving an affiliated group cannot use capital loss carryovers that originated in one of its previous separate return years. 
D) All of the above are false. 
A) Rules for carryforward and carryback of a consolidated net capital loss and a consolidated NOL are the same with the exception of the carryforward period. 
B) Capital loss carrybacks and carryforwards are all treated as short-term capital losses. 
C) A member leaving an affiliated group cannot use capital loss carryovers that originated in one of its previous separate return years. 
D) All of the above are false.

Question 2

Ajak Corporation owns 85% of the single class of Utech Corporation stock.Utech Corporation owns 35% of Tech Corporation.Ajak Corporation also owns 50% of Tech Corporation,and Tech Corporation owns 75% of Baxter Corporation.

Accepted Answer

A) Ajak,Tech,Utech,and Baxter Corporations are an affiliated group. 
B) Ajak,Tech,and Baxter Corporations are an affiliated group. 
C) Ajak,Tech,and Utech Corporations are an affiliated group. 
D) None of the above are correct. 
A) Ajak,Tech,Utech,and Baxter Corporations are an affiliated group. 
B) Ajak,Tech,and Baxter Corporations are an affiliated group. 
C) Ajak,Tech,and Utech Corporations are an affiliated group. 
D) None of the above are correct.

Question 3

Ajax and Brindel Corporations have filed consolidated returns for several calendar years.Ajax acquires land for $60,000 on January 1 of last year.On September 1 of this year,Ajax sells the land to Brindel for $90,000.The basis and holding period for the land acquired by Brindel are:

Accepted Answer

A)    
B)    
C)    
D) none of the above 
A)    
B)    
C)    
D) none of the above

Question 4

On January 1,Alpha Corporation purchases 100% of the stock of Omega Corporation for $2 million.During the year,Omega Corporation earns $350,000 of taxable income,$30,000 of tax-exempt income,and distributes $150,000 in dividends.Each company paid its own tax liability.Assume a 34% tax rate.What basis adjustment must Alpha Corporation make at year-end?

Accepted Answer

Alpha Corporation's initial basis for th

Question 5

Toby owns all of the single class of stock of James and Mony Corporations.James Corporation owns all of Volt Corporation's stock.Mony owns all of Wegnin Corporation.Mony and Wegnin Corporations are foreign corporations.Toby,James,and Volt are domestic corporations.Are the corporations part of an affiliated group?

Accepted Answer

Toby,James,and Volt constitute

Question 6

Intercompany sales between members of an affiliated group filing separate returns cause deferred tax assets to be recognized by both buyer and seller.

Accepted Answer

A) True 
 B)False

Question 7

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?

Accepted Answer

A) The consolidated group must report a net long-term capital gain of $9,000 and a net short-term capital gain of $1,000. 
B) Cannon Corporation's separate return reports a $6,000 net long-term capital gain. 
C) The affiliated group reports a $4,000 net Sec.1231 gain. 
D) None of the above statements are incorrect. 
A) The consolidated group must report a net long-term capital gain of $9,000 and a net short-term capital gain of $1,000. 
B) Cannon Corporation's separate return reports a $6,000 net long-term capital gain. 
C) The affiliated group reports a $4,000 net Sec.1231 gain. 
D) None of the above statements are incorrect.

Question 8

Alto and Bass Corporations have filed consolidated tax returns for several calendar years.At the close of business on September 30,Alto Corporation sells all of the Bass Corporation stock.What portion of Alto's and Bass's income for the current year will be included in the consolidated return,assuming its income is earned evenly throughout the year and all months have 30 days?

Accepted Answer

A)    
B)    
C)    
D) none of the above 
A)    
B)    
C)    
D) none of the above

Question 9

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?

Accepted Answer

A) Last year is an SRLY (separate return limitation year)with respect to Track Corporation. 
B) Track's last year loss is offset against the consolidated current taxable income. 
C) Track's last year loss can be used to offset the current year's consolidated taxable income. 
D) None of Track's last year's loss can be used to offset the current year's consolidated taxable income. 
A) Last year is an SRLY (separate return limitation year)with respect to Track Corporation. 
B) Track's last year loss is offset against the consolidated current taxable income. 
C) Track's last year loss can be used to offset the current year's consolidated taxable income. 
D) None of Track's last year's loss can be used to offset the current year's consolidated taxable income.

Question 10

Identify which of the following statements is true.

Accepted Answer

A) P Corporation receives a dividend from its 100%-owned subsidiary corporation S.P and S have filed consolidated tax returns for a number of years.The dividend payment is out of S's earnings and profits and reduces P's investment in S.The dividend is an intercompany transaction and excluded from P's gross income. 
B) The consolidated dividends-received deduction percentage for dividends received by one affiliated group member from another affiliated group member is always 100%. 
C) The dividends-received deduction claimed when a $50,000 dividend is received from a 100%-owned nonconsolidated life insurance company is $35,000 (ignoring any dividends-received deduction limitations). 
D) All of the above are false. 
A) P Corporation receives a dividend from its 100%-owned subsidiary corporation S.P and S have filed consolidated tax returns for a number of years.The dividend payment is out of S's earnings and profits and reduces P's investment in S.The dividend is an intercompany transaction and excluded from P's gross income. 
B) The consolidated dividends-received deduction percentage for dividends received by one affiliated group member from another affiliated group member is always 100%. 
C) The dividends-received deduction claimed when a $50,000 dividend is received from a 100%-owned nonconsolidated life insurance company is $35,000 (ignoring any dividends-received deduction limitations). 
D) All of the above are false.

Question 11

Marietta and Alpharetta Corporation,two accrual method of accounting corporations that use the calendar year as their tax year,have filed consolidated tax returns for a number of years.Alpharetta Corporation,a 100% owned subsidiary of Marietta,is transferring a patent,equipment,and working capital to newly created Georgia Corporation in exchange for 100% of its stock.In 2011,the corporation will begin to produce parts for the computer industry.Georgia Corporation expects to incur organizational expenditures of $10,000 and start-up expenditures of $60,000.What tax issues should Georgia Corporation consider with respect to the selection of its overall accounting method,inventory method,and tax year,and the proper reporting of its organizational and start-up expenditures?

Accepted Answer

• What tax year can Georgia Corporation

Question 12

Identify which of the following statements is true.

Accepted Answer

A) A built-in deduction accrues in a separate return year,but is not recognized in a consolidated return year. 
B) Section 382 adopts a single-entity approach in determining ownership changes. 
C) The 50-percentage-point minimum stock ownership change that triggers the Sec.382 loss limitation rules will not occur in acquisitive transactions involving a group of corporations filing consolidated returns. 
D) All of the above are false. 
A) A built-in deduction accrues in a separate return year,but is not recognized in a consolidated return year. 
B) Section 382 adopts a single-entity approach in determining ownership changes. 
C) The 50-percentage-point minimum stock ownership change that triggers the Sec.382 loss limitation rules will not occur in acquisitive transactions involving a group of corporations filing consolidated returns. 
D) All of the above are false.

Question 13

Roland,Shedrick,and Tyrone Corporations formed an affiliated group a number of years ago,which has since filed consolidated tax returns.No prior Sec.1231 losses have been reported by any group member.The group had a consolidated capital loss carryover last year.For the current year,the group reports the following results:   Which of following statements is incorrect?

Accepted Answer

A) No Sec.1231 recapture can occur this year. 
B) The net capital gain is taxed at the regular corporate tax rates. 
C) The Sec.1231 loss is treated as an ordinary loss. 
D) The net capital gain is $20,000. 
A) No Sec.1231 recapture can occur this year. 
B) The net capital gain is taxed at the regular corporate tax rates. 
C) The Sec.1231 loss is treated as an ordinary loss. 
D) The net capital gain is $20,000.

Question 14

Jackson and Tanker Corporations are members of an affiliated group.The two corporations have been affiliated since they were formed last year.Both corporations have always used a calendar year as their tax year.Tanker,the subsidiary,has a separate return year NOL of $14,000 from last year.Jackson Corporation has a separate return year NOL of $16,000 from last year.Commencing this year,the two corporations filed a consolidated tax return.The NOLs can be carried over

Accepted Answer

A) to a consolidated return year and both are SRLY (separate return limitation year)losses. 
B) to a consolidated return year and Tanker's loss is a SRLY loss. 
C) to a consolidated return year without limit. 
D) to a consolidated return year and Jackson's loss is a SRLY loss. 
A) to a consolidated return year and both are SRLY (separate return limitation year)losses. 
B) to a consolidated return year and Tanker's loss is a SRLY loss. 
C) to a consolidated return year without limit. 
D) to a consolidated return year and Jackson's loss is a SRLY loss.

Question 15

Jeffrey Corporation owns 85% of Placer Corporation and 25% of Mercer Corporation.Placer Corporation owns 60% of Mercer Corporation and 45% of Tyson Corporation.Jeffrey Corporation also owns 85% of Apple Corporation and Apple Corporation owns 30% of Tyson Corporation.Which of these corporations are members of an affiliated group if all percentages represent voting power and value held by the respective corporations?

Accepted Answer

Jeffrey Corporation is the parent corpor

Question 16

The Alto-Baxter affiliated group filed a consolidated return for the first time last year.The group does not come under the "large" corporation rules.For last year,the group reports a tax liability of $60,000.Cooper Corporation has a $30,000 tax liability last year.This year,the Alto-Baxter affiliated group purchased all of the Cooper stock.This year,the Alto-Baxter-Cooper group reports a $110,000 consolidated tax liability.To avoid penalties for the current year,the group must make timely estimated tax payments of how much during the year?

Accepted Answer

A) $60,000 
B) $90,000 
C) $110,000 
D) No estimated tax payments are required. 
A) $60,000 
B) $90,000 
C) $110,000 
D) No estimated tax payments are required.

Question 17

A member's portion of a consolidated NOL may be carried back against that member's taxable income from the preceding two separate return years.

Accepted Answer

A) True 
 B)False

Question 18

Parent Corporation sells land (a capital asset)to Subsidiary Corporation in an intercompany transaction,recognizing a $25,000 gain.Subsidiary holds the land as an investment for five years before selling the land to a nonmember of the group on an installment basis in a sale in which a $50,000 gain is realized.The sales proceeds are collectible in four equal installments with an appropriate interest amount being charged to the purchaser.Which statement is correct?

Accepted Answer

A) A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation.A $50,000 capital gain is included in consolidated taxable income when Subsidiary sells the land. 
B) A $25,000 capital gain from Parent and a $50,000 capital gain from Subsidiary are included in consolidated taxable income when Subsidiary sells the land. 
C) The $25,000 capital gain from Parent and $50,000 capital gain from Subsidiary are included ratably in consolidated taxable income,commencing in the year the first installment is received. 
D) None of the above are correct. 
A) A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation.A $50,000 capital gain is included in consolidated taxable income when Subsidiary sells the land. 
B) A $25,000 capital gain from Parent and a $50,000 capital gain from Subsidiary are included in consolidated taxable income when Subsidiary sells the land. 
C) The $25,000 capital gain from Parent and $50,000 capital gain from Subsidiary are included ratably in consolidated taxable income,commencing in the year the first installment is received. 
D) None of the above are correct.

Question 19

Diana Corporation owns stock of Tomika Corporation.For Diana and Tomika to qualify for the filing of consolidated returns,at least what percentage of Tomika's total voting power and total value of stock must be directly owned by Diana?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 20

Apple Corporation and Banana Corporation file consolidated returns.In January 2007,Apple sold Banana property with a basis of $120,000 for its fair value of $150,000.Banana sold the property to an unrelated party in April 2008 for $200,000.What amount of gain should be reported for these transactions in the consolidated returns for 2011 and 2012?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Exam 8: Consolidated Tax Returns

Identify which of the following statements is true.

Ajak Corporation owns 85% of the single class of Utech Corporation stock.Utech Corporation owns 35% of Tech Corporation.Ajak Corporation also owns 50% of Tech Corporation,and Tech Corporation owns 75% of Baxter Corporation.

Ajax and Brindel Corporations have filed consolidated returns for several calendar years.Ajax acquires land for $60,000 on January 1 of last year.On September 1 of this year,Ajax sells the land to Brindel for $90,000.The basis and holding period for the land acquired by Brindel are:

Intercompany sales between members of an affiliated group filing separate returns cause deferred tax assets to be recognized by both buyer and seller.

Identify which of the following statements is true.

Identify which of the following statements is true.

A member's portion of a consolidated NOL may be carried back against that member's taxable income from the preceding two separate return years.

Diana Corporation owns stock of Tomika Corporation.For Diana and Tomika to qualify for the filing of consolidated returns,at least what percentage of Tomika's total voting power and total value of stock must be directly owned by Diana?

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