Exam 8: Consolidated Tax Returns

A Federal consolidated group reports a net operating loss for the year. How is this amount allocated to the various group members? Why is this allocation important?

How does a consolidated Federal income tax group compute its domestic production activities deduction (DPAD)? Assume that all of the affiliates in a consolidated group conduct allowable manufacturing activities.

Each of the members of a Federal consolidated tax return group can claim its own $40,000 AMT exemption, subject to phase-out.

The U.S. states apply different rules in treating Federal consolidated groups for corporate income tax purposes. Describe three different treatments that the states currently use.

The consolidated return rules combine the members' transactions involving ____________________ items when computing consolidated taxable income.

The "SRLY" rules for consolidated tax returns are designed to keep corporations from "trafficking" their net operating losses. Explain.

ParentCo purchased all of the stock of ChildCo on January 2, 2011, and the two companies filed consolidated returns for 2011 and thereafter. Both entities were incorporated in 2010. Taxable income computations for the members include the following. Neither group member incurred any capital gain or loss transactions during these years, nor did they make any charitable contributions. No § 382 limit applies. To what extent can SubCo's 2010 losses be used by the group in 2013?

List some of the non-tax reasons that groups of corporations form conglomerates and may be eligible also to file consolidated Federal income tax returns.

Which of the following potentially is a disadvantage of electing to file a Federal consolidated corporate income tax return?

A C corporation must leave the consolidated group if it is restructured as an LLC.

Lacking elections to the contrary, Federal consolidated NOLs are carried back two years and then forward twenty years.

The parent and affiliates must elect to file on a consolidated basis by ____________________ after the first consolidated tax year. or

ParentCo's separate taxable income was $200,000, and JuniorCo's was $50,000. Consolidated taxable income before contributions was $200,000. Charitable contributions made by the affiliated group included $5,000 by ParentCo and $1,000 by JuniorCo. Compute the group's maximum charitable contribution deduction.

In an affiliated group, the parent must own at least 50 percent of each of the subsidiaries.

Compute consolidated taxable income for the calendar year Whitman Group, which elected consolidated status immediately upon creation of the two member corporations in January 2009. All recognized income related to the data processing services of the firms. No intercompany transactions were completed during the indicated years.

Deferring recognition of an intercompany loss is one ____________________ (advantage/disadvantage) of electing to file consolidated returns.

An affiliated group aggregates its separate charitable contributions, deductions for which then are subject to an annual limitation of 10% of consolidated taxable income.

A consolidated Federal income tax return may be the product of a merger of the affiliates, or of some other tax-favored reorganization.

Consolidated return members determine which affiliates will pay how much of the annual Federal income tax liability by making a(n) ____________________ election.

An example of an intercompany transaction is the use of the financial accounting software of the parent corporation by a subsidiary for an arm's length management fee.