Exam 8: Consolidated Tax Returns

How must the IRS collect the liability for Federal taxes from among a consolidated group?

Dividends paid out of a subsidiary's E & P to the parent cause a ____________________ (positive/negative)adjustment to the parent's stock basis of the subsidiary.

The starting point in computing consolidated taxable income is the separate Federal taxable income amounts of the affiliated group members.

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.

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

In computing consolidated taxable income,capital gains and losses are removed from the taxable incomes of the group members and determined on a group basis.

The Parent consolidated group reports the following results for the tax year.Determine each member's share of the consolidated tax liability,assuming that the members all have consented to use the relative taxable income tax-sharing method.Dollar amounts are listed in millions,and a 35% marginal income tax rate applies to all of the entities.

In computing consolidated taxable income,the profit/loss from a sale between Subsidiary and Parent is an example of a(n)____________________ item.

In computing consolidated taxable income,the purchase at a realized gain of a depreciable asset by Subsidiary from Parent is an example of a(n)____________________ transaction.

One of the motivations for the consolidated return rules is to discourage conglomerates from trafficking in the deductible ____________________ of other entities.

When a corporate group elects to file Federal income tax returns on a consolidated basis,it is subject to several tax return filing requirements for its first and subsequent tax years.List the most important of those requirements.

ParentCo and SubCo had the following items of income and deduction for the current year. Compute ParentCo and SubCo's consolidated taxable income or loss.

A Federal consolidated group can claim a dividends received deduction for payments that the parent receives from other affiliates.

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.

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.

When a subsidiary sells to the parent some business-use property that has appreciated from its $20,000 basis to a $50,000 fair market value,the subsidiary immediately recognizes $30,000 ordinary income on the consolidated return.

A corporation organized outside of the U.S.can be included in a Federal consolidated return.

ParentCo,SubOne and SubTwo have filed consolidated returns since 2012.All of the entities were incorporated in 2011.Taxable income computations for the members include the following.None of the group members incurred any capital gain or loss transactions during these years,nor did they make any charitable contributions. How should the 2013 consolidated net operating loss be apportioned among the group members? ParentCo SubOne SubTwo

After a takeover,the parent's balance sheet shows a fair market value cost basis in the subsidiary,for both book and tax purposes.

Describe the general computational method used by a Federal consolidated group in computing taxable income.