Exam 8: Consolidated Tax Returns

P-S is an affiliated group that files a consolidated tax return.For the current year,P has separate taxable income of $350,000 and S's separate taxable loss is $150,000.The group can take a tentative $50,000 consolidated general business credit.If the group's regular tax liability is $61,250 and their tentative minimum tax liability is $34,500,what is their general business credit limitation? The only difference between their taxable income and AMTI is the statutory exemption.

Parent Corporation owns all of the stock of Richards and Smith Corporations on January 1.The three corporations have filed consolidated tax returns for a number of calendar years.Parent sells all of the stock of Richards Corporation on June 1.Parent purchases all of the stock of Taylor Corporation on September 1.Parent sells all of the stock of Smith Corporation on November 1.When does the affiliated group terminate?

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.

Identify which of the following statements is true.

Which of the following corporations is entitled to join in a consolidated tax return without making a special election?

Parent and Subsidiary Corporations are members of an affiliated group.Their separate taxable incomes (before taking into account any dividends)are $75,000 and $85,000,respectively.Subsidiary Corporation receives a dividend from a less-than-20%-owned corporation of $7,500 and from an affiliated 100%-owned nonconsolidated insurance subsidiary of $40,000.Subsidiary distributes a dividend of $35,000 to Parent Corporation who also receives dividends of $5,500 from a less-than-20%-owned corporation.The consolidated dividends-received deduction is what?

Penish and Sagen Corporations have filed consolidated tax returns for several calendar years.At the close of business on September 30,2012,Penish Corporation sells its all of its Sagen stock to June.What are the tax consequences to each corporation?

Which of the following events is an intercompany transaction?

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

Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return.

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?

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

Which of the following statements is incorrect with respect to the consolidated alternative minimum tax?

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?

The IRS can attempt to collect taxes owed on a consolidated return from any of the members of the consolidated group.

Define intercompany transactions and explain the two types of transactions.

Which of the following corporations is an includible corporation for purposes of filing a consolidated tax return?

Identify which of the following statements is true.

Identify which of the following statements is true.

Identify which of the following statements is true.