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Exam 8: Consolidated Tax Returns

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Question 91

Multiple Choice

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Match each of the following terms with the appropriate description, in the context of a consolidated Federal income tax return. -Offsetting gains against other members' losses

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

D) A) and C)
E) B) and C)

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Question 92

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Most of the Federal consolidated income tax return rules are found in detailed sections of the tax Regulations.

A) True
B) False

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Question 93

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When negative adjustments are made to the stock basis of the subsidiary that exceed the basis as of the beginning of the tax year, a(n) ____________________ account is created, rather than giving the parent a negative tax basis in the stock.

All members of an affiliated group have ____________________ and ____________________ liability for each other's Federal income tax liabilities.

How are the members of a Federal consolidated group affected by computations related to E & P?

The foreign tax credit of a consolidated group can be greater than the sum of the credits of the group members when filing separately.

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. -Charitable contributions

The Harris consolidated group reports a net operating loss (NOL) for the year. The tax law works to:

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 tax liability tax-sharing method. Dollar amounts are listed in millions, and a 35% marginal income tax rate applies to all of the entities. $\begin{array}{|c|c|c|c|c|c|}\hline &\text { Parent } & \text { Subone } & \text { SubTwo } & \text { SubThree } & \text { Consolidated } \\\hline \text { Ordinary income } & \$ 600 & \$ 200 & \$ 60 & (\$ 30) & \$ 830 \\\hline \text { Capital gain/loss } & -0- & -0- & 20 & \text { (5) } & 15 \\\hline \$ 1231 \text { gain/loss } & \underline{130} & -0- & (55) & -0] & \underline{75} \\\hline \begin{array}{l}\text { Separate taxable } \\\text { incomes }\end{array} & \$ 730 & \$ 200 & \$ 25 & \begin{array}{c}(\$ 30) \text { with a } \$ 5 \\\text { capital loss } \\\text { carryover }\end{array} & \\\hline \text {Consolidated}\\\text {taxable income}&&&&&\$920\\\hline \text {Consolidated tax}\\\text {liability}&&&&&\$322\\\hline \text {Energy tax credit}\\\text {from SubOne}&&&&&(10)\\\hline \text {Net tax due}&&&&&\$312\\\hline \end{array}$