River Co Owned 80% of Boat Inc

Multiple Choice

River Co. owned 80% of Boat Inc. The two companies filed a consolidated income tax return and River used the initial value method to account for the investment. The following information was available from the two companies' financial statements: Operating income included net unrealized gains, which are associated with transfers of inventories between the two companies, but it did not include dividends received from a subsidiary. The income tax rate was 30%. What is the amount of taxable income reported on the consolidated income tax return?

A) $720,000.
B) $625,000.
C) $621,000.
D) $665,000.
E) $655,000.