Question 1

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return
-Binding nature of election over multiple tax years

Accepted Answer

A) Advantage of consolidating 
B) Disadvantage of consolidating 
C) Neither an advantage nor a disadvantage

Question 2

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return
-Joint and several liability for Federal income tax

Accepted Answer

A) Advantage of consolidating 
B) Disadvantage of consolidating 
C) Neither an advantage nor a disadvantage

Question 3

JuniorCo sells an asset to SeniorCo at a realized loss. That loss is not recognized by the group in the year of the sale, because of the:

Accepted Answer

A)  Wash sale rule. 
B)  Transfer pricing rules. 
C)  Matching rule. 
D)  Acceleration rule. 
E)  None of the above. The group deducts the loss.

Question 4

Match each of the following items with the appropriate description, indicating whether the item is computed on a group basis on a consolidated tax return
-Compensation deductions

Accepted Answer

A) Group item 
B) Not a group item

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Match each of the following items with the appropriate description, indicating whether the item's treatment for financial accounting and Federal income tax purposes is the same or not
-Ownership level of parent at which a subsidiary can join the consolidated group.

Accepted Answer

A) Tax and book treatment is the same 
B) Tax and book treatment differ

Question 7

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.

Accepted Answer

A)  $91,000 
B)  $100,800 
C)  $112,000 
D)  $122,000

Question 8

The calendar year Sterling Group files its Federal corporate income tax return on a consolidated basis. The group's Form 1120 is due on March 15, or September 15 if an extended due date is approved by the IRS.

Accepted Answer

A) True 
 B)False

Question 9

A limited partnership can join the parent's consolidated group for book and for tax purposes.

Accepted Answer

A) True 
 B)False

Question 10

ParentCo owned 100% of SubCo for the entire year, and both companies use the accrual method of tax accounting. During the year, SubCo purchased $20,000 of supplies from ParentCo. In addition, SubCo provided internal audit services to ParentCo, which were worth $40,000. Including these transactions, ParentCo's separate taxable income was $75,000, and SubCo's separate taxable income was $100,000. What is the group's consolidated taxable income for the year?

Accepted Answer

A)  $215,000 
B)  $195,000 
C)  $175,000 
D)  $155,000

Question 11

Most of the rules governing the use of consolidated returns are found in tax ____________________, and not the ____________________.

Accepted Answer

The answer of Most of the rules governing the use...

Question 12

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.

Accepted Answer

A) True 
 B)False

Question 13

The right to file on a consolidated basis is available to a group of corporations when they constitute a "parent-subsidiary affiliated group."

Accepted Answer

A) True 
 B)False

Question 14

A corporation organized in Germany and wholly owned by the U.S. parent can be included in a Federal consolidated return.

Accepted Answer

A) True 
 B)False

Question 15

In terms of the consolidated return rules, the Radcliffe Charitable Foundation is a(n) ____________________ entity.

Accepted Answer

The answer of In terms of the consolidated return rules,...

Question 16

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.

Accepted Answer

A)  $0 
B)  $600 
C)  $6,000 
D)  $20,000 
E)  $25,000

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A consolidated Federal income tax return may be the product of a merger of the affiliates, or of a stock-for-assets takeover.

Accepted Answer

A) True 
 B)False

Question 19

ParentCo's separate taxable income was $200,000, and SubCo's was $50,000. Consolidated taxable income before contributions was $200,000. Charitable contributions made by the affiliated group included $60,000 by ParentCo and $10,000 by SubCo. Compute the group's maximum charitable contribution deduction.

Accepted Answer

A)  $70,000 
B)  $60,000 
C)  $25,000 
D)  $20,000

Question 20

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return
-A new affiliate uses the LIFO method for inventories

Accepted Answer

A) Advantage of consolidating 
B) Disadvantage of consolidating 
C) Neither an advantage nor a disadvantage

Exam 8: Consolidated Tax Returns

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return -Binding nature of election over multiple tax years

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return -Joint and several liability for Federal income tax

JuniorCo sells an asset to SeniorCo at a realized loss. That loss is not recognized by the group in the year of the sale, because of the:

Match each of the following items with the appropriate description, indicating whether the item is computed on a group basis on a consolidated tax return -Compensation deductions

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

Match each of the following items with the appropriate description, indicating whether the item's treatment for financial accounting and Federal income tax purposes is the same or not -Ownership level of parent at which a subsidiary can join the consolidated group.

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.

The calendar year Sterling Group files its Federal corporate income tax return on a consolidated basis. The group's Form 1120 is due on March 15, or September 15 if an extended due date is approved by the IRS.

A limited partnership can join the parent's consolidated group for book and for tax purposes.

Most of the rules governing the use of consolidated returns are found in tax , and not the .

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.

The right to file on a consolidated basis is available to a group of corporations when they constitute a "parent-subsidiary affiliated group."

A corporation organized in Germany and wholly owned by the U.S. parent can be included in a Federal consolidated return.

In terms of the consolidated return rules, the Radcliffe Charitable Foundation is a(n) ____________________ entity.

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

A consolidated Federal income tax return may be the product of a merger of the affiliates, or of a stock-for-assets takeover.

Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return -A new affiliate uses the LIFO method for inventories