Deck 8: Consolidated Tax Returns

Question 1

What types of corporations are not includible corporations for purposes of determining whether or not an affiliated group exists?

Answer 1

Special tax status corporations are not includible corporations.
• Exempt corporations under Sec.501
• Insurance companies subject to tax under Sec.801
• Foreign corporations
• Corporations claiming the Puerto Rico and U.S.possessions tax credit
• Regulated investment companies
• Real estate investment trusts
• Domestic international sales corporations
• S corporations

Question 2

What are the differences between a controlled group and an affiliated group?

Answer 2

Three forms of controlled groups are permitted - brother-sister groups,parent-subsidiary groups,and combined groups.Only parent-subsidiary groups and the parent-subsidiary portion of a combined group can elect to file a consolidated tax return.Four primary differences between a controlled group and an affiliated group exist.First,the two 80% stock ownership tests must be met to have an affiliated group.Only one of the tests needs to be met to have a controlled group.Second,the controlled group definition uses certain stock attribution rules and included and excluded corporation rules that are not used in testing for an affiliated group.Third,certain special status corporations are excluded from the affiliated group definition that may be included in a controlled group.Fourth,the controlled group definition is tested only at December 31.The affiliated group definition must be tested on each day of the year.See Chapter C3 for further discussion of controlled group topics.

Question 3

A Canadian subsidiary cannot file as part of the consolidated group with its U.S.parent.

Answer 3

False

Question 4

The election to file a consolidated return is made annually.

Question 5

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.

A)Ajak,Tech,Utech,and Baxter Corporations are an affiliated group.
B)Ajak,Tech,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 6

A separate return year is a corporation's tax year for which it files a separate tax return or files a consolidated tax return with another affiliated group.

Question 7

Identify which of the following statements is true.

A)If 100% of the stock of two corporations is owned by the same individual,the two corporations are eligible to file a consolidated return.
B)The check-the-box regulations permit partnership and LLCs to elect C corporation tax treatment.
C)A group of corporations that meets the parent-subsidiary controlled group requirements is always eligible to file a consolidated return.
D)All of the above are false.

Question 8

Identify which of the following statements is true.

A)To be part of an affiliated group,a corporation must be at least 80% directly owned by another group member.
B)Only common stock is considered when determining if the 80% ownership test is met for affiliated group eligibility.
C)An affiliated group electing to file a consolidated return may be composed of as few as two corporations.
D)All of the above are false.

Question 9

Which of the following corporations is entitled to join in a consolidated tax return without making a special election?

A)corporations exempt from tax under Sec.501
B)real estate investment trusts
C)closely held corporations
D)foreign corporations

Question 10

Which of the following corporations is an includible corporation for purposes of filing a consolidated tax return?

A)insurance companies
B)S corporations
C)car manufacturing corporation
D)foreign corporations

Question 11

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?

Question 12

Brother-sister controlled groups can elect to file a consolidated tax return.

Question 13

Explain the requirements a group of corporations must meet in order to elect to file a consolidated return.

Question 14

To be an affiliated group,the parent corporation must directly own at least 80% of another group member.

Question 15

What issues determine whether an affiliated group exists?

Question 16

Toby owns all of the single class of stock of James and Mony Corporations.James Corporation owns all of Volt Corporation's stock.Mony owns all of Wegnin Corporation.Mony and Wegnin Corporations are foreign corporations.Toby,James,and Volt are domestic corporations.Are the corporations part of an affiliated group?

Question 17

Diana Corporation owns stock of Tomika Corporation.For Diana and Tomika to qualify for the filing of consolidated returns,at least what percentage of Tomika's total voting power and total value of stock must be directly owned by Diana?

A)
B)
C)
D)

Question 18

Cardinal and Bluebird Corporations both use a calendar year as their tax year.At the close of business on June 30,Cardinal Corporation buys all of Bluebird Corporation's stock.If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year,what portion of Cardinal's income will be included in the consolidated return? (Assume all months have 30 days. )

A)100%
B)50%
C)0%
D)none of the above

Question 19

Jeffrey Corporation owns 85% of Placer Corporation and 25% of Mercer Corporation.Placer Corporation owns 60% of Mercer Corporation and 45% of Tyson Corporation.Jeffrey Corporation also owns 85% of Apple Corporation and Apple Corporation owns 30% of Tyson Corporation.Which of these corporations are members of an affiliated group if all percentages represent voting power and value held by the respective corporations?

Question 20

Cardinal and Bluebird Corporations both use a calendar year as their tax year.At the close of business on June 30,Cardinal Corporation buys all of Bluebird Corporation's stock.If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year,what portion of Bluebird's income will be included in the consolidated return? (Assume all months have 30 days. )

A)100%
B)50%
C)0%
D)none of the above

Question 21

Identify which of the following statements is true.

A)When a new corporation joins an affiliated group,all of its income and expense items for the tax year,including the acquisition date,must be allocated between the separate tax return and consolidated tax return that are to be filed based on the number of days included in each of the two tax years.
B)A consolidated return election may be revoked after 5 years.
C)All members of a consolidated group must use the same tax year.
D)All of the above are false.

Question 22

Alto and Bass Corporations have filed consolidated tax returns for several calendar years.At the close of business on September 30,Alto Corporation sells all of the Bass Corporation stock.What portion of Alto's and Bass's income for the current year will be included in the consolidated return,assuming its income is earned evenly throughout the year and all months have 30 days?

A)
B)
C)
D)none of the above

Question 23

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?

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

Question 24

Parent Corporation sells land (a capital asset)to Subsidiary Corporation in an intercompany transaction,realizing a $25,000 gain.Subsidiary uses the land for five years in its trade or business before selling the land to a nonmember of the group in a cash sale in which a $50,000 gain is realized.Which statement is correct?

A)A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation.A $50,000 Sec.1231 gain is included in consolidated taxable income when Subsidiary sells the land.
B)A $25,000 capital gain and a $50,000 Sec.1231 gain are included in consolidated taxable income when Subsidiary sells the land.
C)A $75,000 Sec.1231 gain ($25,000 from Parent and $50,000 from Subsidiary)is included in consolidated taxable income in the year Subsidiary sells the land (assuming no recapture of previously deducted Sec.1231 losses must occur).
D)None of the above are correct.

Question 25

Which of the following events is an intercompany transaction that requires the deferral and later recognition of income?

A)accrual of rentals on a lease of real property owned by one group member that is used by another group member; both group members use the accrual method of accounting
B)cash dividend payment from a subsidiary corporation to its parent corporation
C)sale of inventory from a subsidiary corporation to its parent corporation
D)None of the above transactions require the deferral and later recognition of income.

Question 26

Parent Corporation sells land (a capital asset)to Subsidiary Corporation in an intercompany transaction,recognizing a $25,000 gain.Subsidiary holds the land as an investment for five years before selling the land to a nonmember of the group on an installment basis in a sale in which a $50,000 gain is realized.The sales proceeds are collectible in four equal installments with an appropriate interest amount being charged to the purchaser.Which statement is correct?

A)A $25,000 capital gain is included in consolidated taxable income when Parent sells the land to Subsidiary Corporation.A $50,000 capital gain is included in consolidated taxable income when Subsidiary sells the land.
B)A $25,000 capital gain from Parent and a $50,000 capital gain from Subsidiary are included in consolidated taxable income when Subsidiary sells the land.
C)The $25,000 capital gain from Parent and $50,000 capital gain from Subsidiary are included ratably in consolidated taxable income,commencing in the year the first installment is received.
D)None of the above are correct.

Question 27

Identify which of the following statements is false.

A)Inventory sales between group members are an example of an intercompany transaction.
B)The basis to the purchasing member of property acquired in an intercompany transaction is the amount of cash paid to the selling member.
C)The holding period for property acquired in an intercompany transaction begins when the corresponding item is reported.
D)In general,buyers and sellers engaging in an intercompany transaction are treated as separate entities.

Question 28

Identify which of the following statements is true.

A)A corporation may be required to file a separate return and file with an affiliated group in the same calendar year.
B)When a corporation joins in filing a consolidated return,taxable income of the member is combined with other members' taxable income prior to any adjustments.
C)If a corporation becomes a member of an affiliated group within the first thirty days of the corporation's tax year,the corporation can elect not to file a short-period tax return.
D)All of the above are false.

Question 29

Identify which of the following statements is true.

A)The basic accounting method elections that are used by the seller in intercompany transactions do not override the intercompany transaction rules.
B)P and S are members of an affiliated group that has filed consolidated tax returns for a number of years.The sale of inventory by P,which was acquired from S in an intercompany transaction,outside the affiliated group triggers the restoration of gain by S.
C)Last year,P,S,and T Corporations have filed consolidated tax returns for a number of years.Last year P Corporation sold land (a Sec.1231 asset)to T at a $75,000 profit.The gain was deferred by P in last year's consolidated tax return.P sold the T stock to Mike on June 1 of this year.The stock sale will require P to report in its income the gain that was deferred on the land sale.
D)All of the above are true.

Question 30

Parent Corporation owns all of the stock of Richards and Smith Corporations on January 1.The three corporations have filed consolidated tax returns for a number of calendar years.Parent sells all of the stock of Richards Corporation on June 1.Parent purchases all of the stock of Taylor Corporation on September 1.Parent sells all of the stock of Smith Corporation on November 1.When does the affiliated group terminate?

A)June 1
B)September 1
C)November 1
D)The original affiliated group does not terminate.

Question 31

Gee Corporation purchased land from an unrelated corporation several years ago for $105,000.The land was used by Gee as a storage lot for company trucks.Gee sold the land to Wilkers,its 85%-owned subsidiary corporation,last year (July 3)for $115,000.The land was also used in Wilkers' trade or business.Wilkers Corporation sold the land for cash this year (August 22)for $130,000 to a corporation that was not a member of the affiliated group.What gains and losses are recognized,deferred,or restored by Gee and Wilkers Corporations?

Question 32

Which of the following is not reported by an affiliated group on a consolidated basis?

A)capital gain
B)section 1231 gain
C)casualty & theft gain
D)All of the above are included.

Question 33

Marietta and Alpharetta Corporation,two accrual method of accounting corporations that use the calendar year as their tax year,have filed consolidated tax returns for a number of years.Alpharetta Corporation,a 100% owned subsidiary of Marietta,is transferring a patent,equipment,and working capital to newly created Georgia Corporation in exchange for 100% of its stock.In 2011,the corporation will begin to produce parts for the computer industry.Georgia Corporation expects to incur organizational expenditures of $10,000 and start-up expenditures of $60,000.What tax issues should Georgia Corporation consider with respect to the selection of its overall accounting method,inventory method,and tax year,and the proper reporting of its organizational and start-up expenditures?

Question 34

P and S are members of an affiliated group that has filed consolidated tax returns for a number of years.The sale of inventory by P that was acquired from S in an intercompany transaction outside the affiliated group triggers the recognition of gain by S.

Question 35

Parent and Subsidiary Corporations have filed calendar-year consolidated tax returns for several years.Parent Corporation uses the cash method of accounting while Subsidiary Corporation uses the accrual method of accounting.If Parent lends Subsidiary money,

A)the interest expense is deductible when accrued.
B)the interest expense and interest income may be reported in different consolidated return years.
C)the interest income is reported when the interest expense is accrued by Subsidiary.
D)the interest expense deduction is taken when Parent reports the interest income.

Question 36

Apple Corporation and Banana Corporation file consolidated returns.In January 2007,Apple sold Banana property with a basis of $120,000 for its fair value of $150,000.Banana sold the property to an unrelated party in April 2008 for $200,000.What amount of gain should be reported for these transactions in the consolidated returns for 2011 and 2012?

A)
B)
C)
D)

Question 37

Identify which of the following statements is true.

A)Corporations that join in a consolidated return must adopt the same tax year as the parent corporation.
B)Permission to discontinue the filing of consolidated tax returns is sometimes granted by the IRS.
C)Additional administrative costs may be incurred when filing a consolidated tax return.
D)All of the above are true.

Question 38

Which of the following events is an intercompany transaction?

A)a capital contribution
B)accrual of interest on a loan made by one group member to another group member; both group members use the accrual method of accounting
C)dividend payment received from a subsidiary corporation to its parent corporation; the subsidiary corporation is not an includible corporation
D)a parent corporation's sale of stock of a subsidiary corporation to a nonmember of the group

Question 39

Penish and Sagen Corporations have filed consolidated tax returns for several calendar years.At the close of business on September 30,2012,Penish Corporation sells all of its Sagen stock to June.What are the tax consequences to each corporation?

Question 40

Ajax and Brindel Corporations have filed consolidated returns for several calendar years.Ajax acquires land for $60,000 on January 1 of last year.On September 1 of this year,Ajax sells the land to Brindel for $90,000.The basis and holding period for the land acquired by Brindel are:

A)
B)
C)
D)none of the above

Question 41

Which of the following statements is true?

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

Question 42

Parent Corporation purchases a machine (a five-year property)for $20,000.It claims $4,000 of depreciation under the MACRS rules in the first year it owns the property.At the close of business on the last day of the first year,Parent sells the machine to a 100%-owned corporation (Subsidiary)for $18,000.Subsidiary immediately commences depreciating the machine as a five-year property using the regular MACRS rules.What depreciation can be claimed by Subsidiary Corporation in the first year it uses the machine?

Question 43

Steps 1 through 3 result in the member's separate taxable income.Combine these amounts to equal the group's combined taxable income.

Question 44

Identify which of the following statements is true.

A)The corporate AMT is determined on a separate return basis and then consolidated.
B)All corporations filing consolidated tax returns are subject to the AMT.
C)Alternative minimum tax payments from prior consolidated return years that are attributable to timing or permanent differences can be carried over by the affiliated group and claimed as a credit on current or future consolidated returns.
D)All of the above are false.

Question 45

Compute each group member's taxable income (or loss)based on the member's own accounting methods as if the corporation were filing its own separate tax return.

Question 46

Define intercompany transactions and explain the two types of transactions.

Question 47

Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return.

Question 48

Gee Corporation purchased land from an unrelated corporation several years ago for $105,000.The land was used by Gee as a storage lot for company trucks.Gee sold the land to Wilkers,its 85%-owned subsidiary corporation,last year (July 3)for $115,000.The land was also used in Wilkers' trade or business.Wilkers Corporation sold the land this year (August 22)for $130,000 to a corporation that was not a member of the affiliated group.The $130,000 purchase price is to be collected in five equal,annual installments,commencing with the current year's sale date.What gains and losses are recognized,deferred,or restored by Gee and Wilkers Corporations?

Question 49

What are the five steps in calculating consolidated taxable income?

Question 50

The treatment of capital loss carrybacks and carryovers is similar to NOLs.

Question 51

Why are other intercompany transactions not given any special treatment?

Question 52

Identify which of the following statements is false.

A)A corresponding item includes the income,gain,deduction,or loss amount reported by the buyer from an intercompany transaction,or from property acquired in an intercompany transaction.
B)Affiliated groups of corporations filing a consolidated tax return are not eligible for the small corporation exemption from the corporate alternative minimum tax.
C)An intercompany transaction generally results in the selling member and buying member in a property transaction being treated as divisions of a single corporation.
D)Intercompany dividends and undistributed subsidiary earnings do not create temporary differences for affiliated companies filing a consolidated return.

Question 53

The Alpha-Beta affiliated group has a consolidated regular tax amount of $52,000 and a tentative minimum tax amount of $50,000 in the current year.The maximum general business credit that can be used on the consolidated return is

A)$2,000.
B)$6,750.
C)$50,000.
D)none of the above

Question 54

Identify which of the following statements is false.

A)Unused general business credit carryforwards,which originate in a consolidated return year,are absorbed in a FIFO manner,beginning with the earliest ending tax year.
B)An intercompany transaction is a transaction that takes place between two corporations that are members of the same affiliated group immediately after the transaction.
C)An intercompany item includes income reported by the seller on the providing of services by one group member to another group member and the gain/loss reported by the seller on the sale of property to another group member.
D)All of the above are false.

Question 55

Which of the following statements is incorrect with respect to the consolidated alternative minimum tax?

A)A separate alternative minimum taxable income computation is made for each individual group member.These amounts are then totaled to arrive at consolidated alternative minimum taxable income.
B)Positive adjustments that are made with respect to one group member can be offset by negative adjustments that are made with respect to another group member in computing consolidated alternative minimum taxable income.
C)The affiliated group's alternative minimum tax payment is available as a credit against its regular tax amount in future tax years.
D)The estimated tax payment rules apply to the alternative minimum tax.

Question 56

Parent Corporation purchases a machine (a five-year property)for $20,000.It claims $4,000 of depreciation under the MACRS rules in the first year it owns the property.At the close of business on the last day of the first year,Parent sells the machine to a 100%-owned corporation (Subsidiary)for $18,000.Subsidiary immediately commences depreciating the machine as a five-year property using the regular MACRS rules.
What gain is reported by Parent Corporation in the first year that Subsidiary Corporation depreciates the machine?

Question 57

Make adjustments to each group member's taxable income for certain intercompany transactions,inventory adjustments,dividends received,excess loss (negative investment basis)accounts,and built-in deductions.

Question 58

Adjust the group's combined taxable income for items reported on a consolidated basis to equal the consolidated taxable income.

Question 59

Which of the following statements is incorrect with respect to the consolidated alternative minimum tax?

A)The starting point for the consolidated alternative minimum taxable income computation is consolidated taxable income before the NOL deduction.
B)The difference between the consolidated ACE amount and the consolidated preadjustment AMTI is an adjustment to consolidated taxable income in arriving at AMTI.
C)Each corporation is permitted its own $40,000 statutory exemption.
D)If the consolidated tentative minimum tax is smaller than the consolidated regular tax,there is no alternative minimum tax liability.

Question 60

Remove certain gains,losses,and deductions from each member's taxable income since they must be computed on a consolidated basis (e.g. ,NOLs,capital gains and losses,Sec.1231 gains and losses,charitable contribution deductions,dividends-received deduction,percentage depletion under Sec.613A).

Question 61

Identify which of the following statements is true.

A)Rules for carryforward and carryback of a consolidated net capital loss and a consolidated NOL are the same with the exception of the carryforward period.
B)Capital loss carrybacks and carryforwards are all treated as short-term capital losses.
C)A member leaving an affiliated group cannot use capital loss carryovers that originated in one of its previous separate return years.
D)All of the above are false.

Question 62

Identify which of the following statements is true.

A)The basic dividends-received deduction rules generally do not apply to the calculation of the consolidated dividends-received deduction.
B)A member of an affiliated group can elect to carry back its own separate return losses from a consolidated return year to one of its earlier profitable separate return years.
C)A consolidated NOL is computed in part by including the consolidated capital gain in taxable income.
D)All of the above are false.

Question 63

P-S is an affiliated group that files a consolidated tax return.For the current year,P has separate taxable income of $350,000 and S's separate taxable loss is $150,000.The group can take a tentative $50,000 consolidated general business credit.If the group's regular tax liability is $61,250 and their tentative minimum tax liability is $34,500,what is their general business credit limitation? The only difference between their taxable income and AMTI is the statutory exemption.

Question 64

Jason and Jon Corporations are members of an affiliated group whose taxable incomes (before dividends)are $90,000 and $100,000,respectively.Jason Corporation owns all of the Jon stock.Jon Corporation received a dividend from a less-than-20%-owned corporation of $9,900 and $25,000 from a 100%-owned nonconsolidated insurance company.Jon Corporation distributed a $40,000 dividend to Jason Corporation.Jason Corporation also received dividends from a 25%-owned corporation of $9,500.The consolidated dividends-received deduction for federal income tax purposes is what?

Question 65

Blair and Cannon Corporations are the two members of an affiliated group.No prior net Sec.1231 losses have been reported by any group member.The two corporations report consolidated ordinary income of $100,000 and gains and losses from property transactions as follows: Included in the above totals is $6,000 of long-term capital losses recognized by Cannon on an intercompany transaction.Excluded from the above is a $4,000 Sec.1231 gain originally deferred by Cannon that must be reported by the group in the current year.
Which one of the following statements is incorrect?

A)The consolidated group must report a net long-term capital gain of $9,000 and a net short-term capital gain of $1,000.
B)Cannon Corporation's separate return reports a $6,000 net long-term capital gain.
C)The affiliated group reports a $4,000 net Sec.1231 gain.
D)None of the above statements are incorrect.

Question 66

Which of the following statements is true?

A)The definition of an affiliated group is the same for purposes of calculating the U.S.production activities deduction as it is for filing a consolidated return.
B)The consolidated charitable contributions deduction is limited to 10% of adjusted consolidated taxable income,without regard to the consolidated DRD,consolidated NOL carrybacks,consolidated capital loss carrybacks,and consolidated charitable contributions deduction.
C)The definition of an affiliated group for purposes of the U.S.production activities deduction uses a 60% ownership threshold.
D)All of the above are true statements.

Question 67

A member's portion of a consolidated NOL may be carried back against that member's taxable income from the preceding two separate return years.

Question 68

Identify which of the following statements is true.

A)P Corporation receives a dividend from its 100%-owned subsidiary corporation S.P and S have filed consolidated tax returns for a number of years.The dividend payment is out of S's earnings and profits and reduces P's investment in S.The dividend is an intercompany transaction and excluded from P's gross income.
B)The consolidated dividends-received deduction percentage for dividends received by one affiliated group member from another affiliated group member is always 100%.
C)The dividends-received deduction claimed when a $50,000 dividend is received from a 100%-owned nonconsolidated life insurance company is $35,000 (ignoring any dividends-received deduction limitations).
D)All of the above are false.

Question 69

Blair and Cannon Corporations are members of an affiliated group.No prior net Sec.1231 losses have been reported by any group member.The two corporations report consolidated ordinary income of $100,000 and gains and losses from property transactions as follows. Which of the following statements is correct?

A)The consolidated group reports a net short-term capital gain of $1,000.
B)Blair Corporation's separate return reports a $4,000 net long-term capital gain.
C)Cannon Corporation's separate return reports a $1,000 net long-term capital loss.
D)All three of the above are correct.

Question 70

Parent and Subsidiary Corporations are members of an affiliated group.Their separate taxable incomes (before taking into account any dividends)are $75,000 and $85,000,respectively.Subsidiary Corporation receives a dividend from a less-than-20%-owned corporation of $7,500 and from an affiliated 100%-owned nonconsolidated insurance subsidiary of $40,000.Subsidiary distributes a dividend of $35,000 to Parent Corporation who also receives dividends of $5,500 from a less-than-20%-owned corporation.The consolidated dividends-received deduction is what?

Question 71

Identify which of the following statements is true.

A)The charitable contribution deduction is calculated on a separate return basis for each group member,and the separate company deductions of the individual group members are totaled to arrive at the consolidated deduction.
B)An affiliated group member cannot carry over any unused charitable contribution deduction from a consolidated return year to a separate return year if the member leaves the group prior to the end of the current consolidated return year.
C)Charitable contributions,which cannot be deducted in a consolidated return due to the 10% deduction limitation,can be carried forward indefinitely by the affiliated group.
D)All of the above are false.

Question 72

Boxcar Corporation and Sidecar Corporation,an affiliated group,reports the following results for the current year: The affiliated group's consolidated taxable income is

A)$40,000.
B)$49,000.
C)$51,000.
D)$52,000.

Question 73

Roland,Shedrick,and Tyrone Corporations formed an affiliated group a number of years ago,which has since filed consolidated tax returns.No prior Sec.1231 losses have been reported by any group member.The group had a consolidated capital loss carryover last year.For the current year,the group reports the following results: Which of following statements is incorrect?

A)No Sec.1231 recapture can occur this year.
B)The net capital gain is taxed at the regular corporate tax rates.
C)The Sec.1231 loss is treated as an ordinary loss.
D)The net capital gain is $20,000.

Question 74

The Alto-Baxter affiliated group filed a consolidated return for the first time last year.The group does not come under the "large" corporation rules.For last year,the group reports a tax liability of $60,000.Cooper Corporation has a $30,000 tax liability last year.This year,the Alto-Baxter affiliated group purchased all of the Cooper stock.This year,the Alto-Baxter-Cooper group reports a $110,000 consolidated tax liability.To avoid penalties for the current year,the group must make timely estimated tax payments of how much during the year?

A)$60,000
B)$90,000
C)$110,000
D)No estimated tax payments are required.

Question 75

Alpha,Beta,Gamma,and Delta Corporations form a controlled group.Delta is a nonincludible regulated investment company.Only Alpha,Beta,and Gamma are able to file their income tax returns on a consolidated basis.What options are available for allocating the 15%,25%,and 34% tax rates to the members of the controlled group?

Question 76

How do intercompany transactions affect the calculation of capital gains/losses?

Question 77

Identify which of the following statements is true.

A)When applying the large corporation rules for purposes of determining underpayments,each member of an affiliated group is considered separately.
B)The entire consolidated tax liability cannot be collected from one group member.
C)Once consolidated tax returns have been filed for two consecutive years,the affiliated group must pay estimated taxes on a consolidated basis.
D)All of the above are false.

Question 78

Boxcar Corporation and Sidecar Corporation,an affiliated group,reports the following results for the current year: What is the affiliated group's consolidated regular tax liability?

A)$7,700
B)$7,350
C)$6,650
D)$7,950

Question 79

Identify which of the following statements is true.

A)A shareholder corporation that receives a nondividend distribution from an affiliated group member is not required to recognize a gain when the distribution amount exceeds the shareholder's basis in the distributing corporation's stock.
B)The dividends-received deduction limitation for dividends received by members of an affiliated group from nonmembers is applied to the separate taxable income of each group member.
C)The dividends-received deduction cannot be taken in full on a consolidated return if the deduction amount creates or increases a consolidated NOL.
D)All of the above are false.

Question 80

Parent and Subsidiary Corporations form an affiliated group.Last year,the initial year of operation,Parent and Subsidiary filed separate returns.This year,the group files a consolidated tax return.The results for last year and the current year are: Taxable Income
How much of Subsidiary's loss can be carried back to last year?

A)$0
B)$20,000
C)$25,000
D)none of the above