Question 1

Toby Corporation owns 85% of James Corporation's single class of stock and 35% of Mony Corporation's single class of stock. James Corporation owns 45% of Mony's stock. The remainder of James and Mony's stock is owned by 80 individual shareholders. Are the corporations part of an affiliated group, and can they elect to file a consolidated tax return?

Accepted Answer

The answer of Toby Corporation owns 85% of James Corporation's...

Question 2

Why are other intercompany transactions not given any special treatment?

Accepted Answer

The answer of Why are other intercompany transactions not given...

Question 3

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.

Accepted Answer

A)  Ajak, Tech, and Baxter Corporations are an affiliated group. 
B)  Ajak, Tech, Utech, and Baxter Corporations are an affiliated group. 
C)  Ajak, Tech, and Utech Corporations are an affiliated group. 
D)  None of the above are correct.

Question 4

The election to file a consolidated return is made annually.

Accepted Answer

A) True 
 B)False

Question 5

Parent and Subsidiary Corporations form an affiliated group. In 2018, the initial year of operation, Parent and Subsidiary filed separate returns. In 2019, the group files a consolidated return. $\begin{array}{l}
\text { Taxable Income }\
\begin{array} { | l | r | c | } 
\hline &{ 2018 } &{ 2019 } \
\hline \text { Parent } & ( \$ 16,000 & \$ 20,000 \
\hline \text { Subsidiary } & 10,000 & ( 21,000 \
\hline
\end{array}
\end{array}$ How much of the Subsidiary loss can be carried back to last year?

Accepted Answer

A)  $0 
B)  $10,000 
C)  $1,000 
D)  none of the above

Question 6

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?

Accepted Answer

A)  the purchasing group member selling the machine for cash to a nonmember of the group 
B)  the departure of the purchasing group member from the affiliated group when its stock is sold to a nonmember of the group 
C)  the purchasing group member depreciating the machine 
D)  All of the above are recognition events.

Question 7

Blue and Gold Corporations are members of the Blue- Gold affiliated group, which filed a consolidated tax return for last year, reporting a $200,000 consolidated NOL. Small taxable income amounts were reported by Blue and Gold in separate tax returns filed in years prior to last year. Early in the current year, 100% of Blue's stock is purchased by Robert Martin who contributes additional funds to Blue Corporation sufficient to acquire all of Green Corporation's stock. For the current year, the affiliated group reports the following results (excluding the consolidated NOL deduction): $$\begin{array} { | l | r | } 
\hline { \text { Corporation } } & \text { Taxable Income } \
\hline \text { Blue } & \$ 150,000 \
\hline \text { Gold } & ( 25,000) \
\hline \text { Green (since acquisition) } & 100,000 \
\hline
\end{array}$$ Which of the following statements is correct?

Accepted Answer

A)  The portion of last year's NOL that is not used as a carryback can be carried over, but is used only against the Blue's and Gold's taxable income. 
B)  Last year's NOL cannot be carried back. 
C)  The portion of last year's NOL that is not used as a carryback can be carried over against the current consolidated taxable income, but is subject to the Sec. 382 limitation. 
D)  The portion of last year's NOL that is not used as a carryback can be carried over the current year but is only used against Blue's taxable income.

Question 8

Which of the following statements is true?

Accepted Answer

A)  The general business credit can be carried back 3 years and forward 15 years. 
B)  The general business credit can be carried forward indefinitely. 
C)  A consolidated group determines its general business credit on a consolidated basis. 
D)  The general business credit cannot be carried forward or backward.

Exam 8: Consolidated Tax Returns

Why are other intercompany transactions not given any special treatment?

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.

The election to file a consolidated return is made annually.

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?

Which of the following statements is true?