Exam 8: Consolidated Tax Returns

The parent and affiliates are listed on Form ____________________ accompanying the first consolidated Form 1120 that is filed.

Which,if any,of the following is a disadvantage of electing to file a consolidated return?

ParentCo and SubCo had the following items of income and deduction for the current year. Compute ParentCo and SubCo's taxable income or loss computed on a separate basis.

If,on joining an affiliated group,the new member has a different tax year than the parent of the group,the new member must conform its year-end to the parent's by the end of the ____________________ consolidated year.

In the year a subsidiary begins to be included in a consolidated return group,it often must file a tax return for a ____________________ tax year.

ParentCo purchased all of the stock of SubCo on January 1,2007,for $900,000.SubCo produced a loss for 2007 of $275,000 and distributed cash of $15,000 to ParentCo.In 2008,SubCo generated a loss of $850,000; in 2009,it recognized net income of $15,000.What is ParentCo's capital gain or loss if it sells all of its SubCo stock to a nongroup member on January 1,2010,for $50,000?

The § 382 NOL limitation rules override the ____________________ limits.

Except for the § 199 domestic production activities deduction (DPAD),the members of an electing affiliated group report the following data. Compute the group's DPAD for calendar tax year 2009.

Legislative Regulations are the basis for most of the consolidated return rules. The Code offers few details in this area.

Discuss how a parent corporation computes its stock basis for a subsidiary that joins in a Federal consolidated income tax return.

Parent Corporation,SubOne,and SubTwo have filed consolidated returns since 2008.All of the entities were incorporated in 2007.None of the group members incurred any capital gain or loss transactions during 2007-2010,nor did they make any charitable contributions.Taxable income computations for the members are listed below. * Separate return year. ** Consolidated return year. a.How much of the 2009 loss is apportioned to SubOne and SubTwo? How is this loss treated in generating a refund of prior tax payments? b.Why would Parent consider electing to forgo the carryback of the 2009 consolidated NOL? c.In this light, analyze the election to consolidate.

ParentCo and SubCo had the following items of income and deduction for the current year. Compute ParentCo and SubCo's taxable income or loss computed on a separate basis.

Why do separate corporations form conglomerates,such that a consolidated tax return election becomes possible?

A Federal consolidated group makes an annual election to allocate the tax liability for the year among the group members.

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return. a.Advantage of consolidating b.Disadvantage of consolidating -Eliminate taxation of intercompany dividend distributions

Parent Corporation owns 100% of the stock of SubCo,and the two corporations file a consolidated tax return.Over a five-year period,the corporations generate the following taxable income/(loss).Indicate how you would assign the taxpayers' low marginal rates that apply to the group's first $75,000 of taxable income.Explain the rationale for your recommendation.

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

LargeCo files on a consolidated basis with LittleCo.The subsidiary was acquired for $250,000 on January 1,year 1,and it paid a $40,000 dividend to LargeCo at the end of both year 2 and year 3. b.LargeCo sold LittleCo to an unrelated competitor for $400,000 on December 31, Year 3. How will LargeCo account for this sale?

ParentCo's controlled group includes the following members.ParentCo owns all of the stock in each of the listed entities.Which entities can join ParentCo in a consolidated return?

Tax incentives constitute the primary motivation for most corporations to operate on a consolidated basis.