Exam 8: Consolidated Tax Returns

Subsidiary Corporation purchases a used machine from Parent Corporation in an intercompany transaction.Which of the following events is a corresponding event for the intercompany transaction?

Identify which of the following statements is false.

A consolidated NOL carryover is $52,000 at the beginning the year.Twenty-five percent of the loss is allocable to Duke Corporation.Duke Corporation leaves the group in the middle of the affiliated group's tax year.Before Duke's departure,it had earnings of $15,000 for the year,and the remainder of the affiliated group earned a total of $25,000,or $40,000 of taxable income for the group,excluding any NOL carryover.Following its departure from the affiliated group,Duke earned $8,000 in its first separate return.How much of the $52,000 NOL can Duke use on its first separate 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.

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:

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?

What issues determine whether an affiliated group exists?

Parent and Subsidiary Corporations form an affiliated group.Last year,the initial year of operation,Parent and Subsidiary filed separate returns.This year,the group files a consolidated tax return.The results for last year and the current year are: Taxable Income How much of Subsidiary's loss can be carried back to last year?

Explain the requirements a group of corporations must meet in order to elect to file a consolidated return.

Why are other intercompany transactions not given any special treatment?

Identify which of the following statements is true.

The treatment of capital loss carrybacks and carryovers is similar to NOLs.

To be an affiliated group,the parent corporation must directly own at least 80% of another group member.

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 an $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?

Identify which of the following statements is false.

What is the consequence of having losses subject to the SRLY limitations?

Which of the following events is an intercompany transaction that requires the deferral and later recognition of income?

Parent Corporation sells land (a capital asset)to Subsidiary Corporation in an intercompany transaction,realizing a $25,000 gain.Subsidiary uses the land for five years in its trade or business before selling the land to a nonmember of the group in a cash sale in which a $50,000 gain is realized.Which statement is correct?

Mako and Snufco Corporations are affiliated and have filed consolidated returns for the past three years.Mako acquired 100% of Zebco stock on January 1 of last year,the date of Zebco's formation.Mako,Snufco,and Zebco,who have filed consolidated returns for last year and the current year,report the following taxable incomes. The $15,000 consolidated NOL reported in the current year

Gee Corporation purchased land from an unrelated corporation several years ago for $105,000.The land was used by Gee as a storage lot for company trucks.Gee sold the land to Wilkers,its 85%-owned subsidiary corporation,last year (July 3)for $115,000.The land was also used in Wilkers' trade or business.Wilkers Corporation sold the land for cash this year (August 22)for $130,000 to a corporation that was not a member of the affiliated group.What gains and losses are recognized,deferred,or restored by Gee and Wilkers Corporations?