Exam 8: Consolidated Tax Returns

The Philstrom consolidated group reported the following taxable income amounts.Parent owns all of the stock of both Junior and Minor.Determine the net operating loss (NOL)that is apportioned to Minor.

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.

Campbell Corporation left the Crane consolidated tax return group after the calendar 2012 tax year.Generally,Crane can add Campbell back to the consolidated group,but no earlier than for the 2015 tax year.

Keep Corporation joined an affiliated group by merger.The group generated a 2012 consolidated NOL,and Keep's share of the loss was $50,000.Keep's share of the loss is included in the group's NOL carryforward to 2013.

Cooper Corporation joined the Duck consolidated Federal income tax return group,when Cooper held a $1 million NOL carryforward.In its first year as a part of the Duck group,Cooper generated a $150,000 taxable loss.For that year,Duck cannot deduct any of Cooper's NOL in computing consolidated taxable income.

In computing consolidated E & P,dividends paid to the parent by group members are subtracted.

Consolidated estimated tax payments must begin for the ____________________ (first,second,etc. )tax year after the group's election. or

In computing consolidated taxable income,the domestic production activities deduction (DPAD)is removed from the taxable incomes of the group members and determined on a group basis.

The group of Parent Corporation,SubOne,and SubTwo has filed a consolidated return since 2011.The first two entities were incorporated in 2010,and SubTwo came into existence in 2011 through an asset spin-off from Parent.Taxable income computations for the members are shown below.None of the group members incurred any capital gain or loss transactions during 2010-2013,nor did they make any charitable contributions. Describe the treatment of the group's 2012 consolidated NOL.Hint: Apply the offspring rule. * Consolidated return year.

A limited partnership can join the parent's consolidated group for book,but not for tax,purposes.

The consolidated income tax return rules apply only for Federal tax purposes.Financial accounting rules can be quite different from the corresponding tax rules,but the tax professional should be familiar with both sets of requirements.Describe the major differences between the book and tax treatment for the conglomerate's reporting of:

The domestic production activities deduction (DPAD)of the affiliates is an example of an item that is computed on a ____________________ basis on a Federal corporate income tax consolidated return.

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

Keep Corporation joined an affiliated group by merger in 2012.The group generated a consolidated 2012 NOL,and Keep's share of the loss was $50,000.Lacking an election by the parent to the contrary,Keep can carry the loss back to its separate 2010 return,and the parent can claim a tax refund.

The Rub,Spill,and Ton Corporations file Federal income tax returns on a consolidated basis.The group's tax return currently is under audit.Under a valid tax-sharing agreement,each corporation is liable for one-third of the group's consolidated tax liability.The affiliates have agreed with the auditor that the group's unpaid liability for the year is $90,000.Because of an incorrect tax return position,another $3,000 in interest and an $18,000 penalty is attributable solely to Ton. At present,only Rub is solvent and has the cash with which to make such a tax payment.What is the maximum amount for which the government could be successful in forcing Rub to satisfy the outstanding liabilities of the consolidated group?

In terms of the consolidated return rules,Telefono Sales of Uruguay is a(n)____________________ entity.

The Philstrom consolidated group reported the following taxable income amounts.Parent owns all of the stock of both Junior and Minor.Determine the net operating loss (NOL)that is apportioned to Junior.

Certain tax return items are computed on a group basis when a Federal consolidated return election is in place.List five or more of these group-basis items.

Compute consolidated taxable income for the calendar year Holloway Group,which elected consolidated status immediately upon creation of the two member corporations in January 2011.All recognized income related to the data processing services of the firms.No intercompany transactions were completed during the indicated years.

How do the members of a consolidated group split among themselves the benefits of the lower tax brackets on the first $75,000 of taxable income?