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Question;809. #1-9 Match each of the following terms with;the appropriate description, in the context of a consolidated Federal income;tax return.Additional compliance deadlines and recordkeepingOffsetting;gains against other members? lossesLoss deferral on intercompany;transactionsGain deferral on intercompany transactionsSharing of low Federal;corporate income tax bracketsBinding nature of election over multiple tax;yearsSharing of one AMT exemptionJoint and several liability for Federal income;taxConformity of affiliates? tax year endsDisadvantage of consolidating;Advantage of consolidating Disadvantage of consolidating Advantage of;consolidating Disadvantage of consolidating Disadvantage of consolidating;Disadvantage of consolidating Disadvantage of consolidating Disadvantage of;consolidating;[a] 1. Additional compliance;deadlines and recordkeeping;[b] 2. Offsetting gains;against other members? losses;[c] 3. Loss deferral on;intercompany transactions;[d] 4. Gain deferral on intercompany;transactions;[e] 5. Sharing of low Federal;corporate income tax brackets;[f] 6. Binding nature of;election over multiple tax years;[g] 7. Sharing of one AMT;exemption;[h] 8. Joint and several;liability for Federal income tax;[i] 9. Conformity of;affiliates? tax year ends;810. #10-15 Match each of the following items with;the appropriate description, indicating whether the item increases or decreases;the parent?s basis in the stock of a subsidiary.Member?s operating;lossMember?s operating loss, when stock basis = $0Member?s operating;gains/profitsDividend paid to parent out of affiliate?s E & PDecrease in a;group member?s excess loss account from $3 million to $1 millionDeduction on;consolidated return for member?s capital loss carryforward from a prior tax;yearDecreases stock basis No effect on stock basis Increases stock basis;Decreases stock basis No effect on stock basis Decreases stock basis;[a] 1. Member?s operating loss;[b] 2. Member?s operating;loss, when stock basis = $0;[c] 3. Member?s operating;gains/profits;[d] 4. Dividend paid to parent;out of affiliate?s E & P;[e] 5. Decrease in a group;member?s excess loss account from $3 million to $1 million;[f] 6. Deduction on;consolidated return for member?s capital loss carryforward from a prior tax;year;811. #16-20 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.Parent;owns 100% of a U.S. partnership and wants the entity to join the consolidated;group.Parent owns 100% of a Brazil corporation and wants the entity to join the;consolidated group.Computation of consolidated income includes elimination;entries.;Purchased goodwill is amortized into annual income amounts.;Tax and book treatment differ Tax and book treatment differ Tax and book;treatment differ Tax and book treatment is the same Tax and book treatment differ;[a] 1. Ownership level of parent at;which a subsidiary can join the consolidated group.;[b] 2. Parent owns 100% of a;U.S. partnership and wants the entity to join the consolidated group.;[c] 3. Parent owns 100% of a;Brazil corporation and wants the entity to join the consolidated group.;[d] 4. Computation of;consolidated income includes elimination entries.;[e] 5. Purchased goodwill is;amortized into annual income amounts.;812. #21-26 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 deductionsDomestic;production activities deductionAMT liabilityCost of goods soldInterest income;from Ford Motor bondsNet capital gain/lossNot a group item Group item Group;item Not a group item Group item Not a group item;[a] 1. Compensation deductions;[b] 2. Domestic production;activities deduction;[c] 3. AMT liability;[d] 4. Cost of goods sold;[e] 5. Interest income from;Ford Motor bonds;[f] 6. Net capital gain/loss;813. CO #1;One of the motivations for the consolidated return rules is to discourage;conglomerates from trafficking in the deductible ____________________ of other;entities.;Correct;Answer(s);a. losses;814. CO #2;Most of the rules governing the use of consolidated returns are found in tax;and not the ____________________.;Correct;Answer(s);a. regulations, Code;815. CO #3;Deferring recognition of an intercompany loss is one;(advantage/disadvantage) of electing to file consolidated returns.;816. CO #4;The parent and affiliates must elect to file on a consolidated basis by;after the first consolidated tax year.;817. CO #5;An affiliated group exists where there is ____________________ percent;ownership of all of the affiliates within the group, and there is an;identifiable ____________________ corporation.;818. CO #6;When an affiliated group elects to file Federal consolidated income tax;returns, it gives up the ability to claim a ____________________ deduction for;distributions of profits paid to other members.;819. CO #7;Members of an affiliated group must share one $40,000 ____________________ for;the tax year.;820. CO #8;In terms of the consolidated return rules, Akron Manufacturing LLC is a(n);entity.;821. CO #9;Generally, when a subsidiary leaves an on-going consolidated group, it must;wait ____________________ years before it can reenter another consolidated;group.;822. CO #10;Consolidated estimated tax payments must begin for the;(first, second, etc.) tax year after the group?s election.;823. CO #11;All members of an affiliated group have ____________________ and;liability for each other?s Federal income tax liabilities.;824. CO #12;Consolidated return members determine which affiliates will pay how much of the;annual Federal income tax liability by making a(n);election.;\;825. CO #13;If, on joining an affiliated group, SubCo has a different tax year than that of;ParentCo, SubCo must switch its year-end to ParentCo?s by the end of the;(first, second, etc.) tax year after the election to;consolidate.;826. CO #14;Within a Federal consolidated income tax group, SubOne;(can/cannot) use the LIFO inventory method at the same time that SubTwo uses;dollar-cost averaging.;827. CO #15;Dividends paid by a subsidiary to the parent cause a;(positive/negative) adjustment to the parent?s stock basis of the subsidiary.;828. CO #16;If the negative adjustments to the stock basis of the subsidiary exceed the;positive adjustments plus the subsidiary stock basis at the beginning of the;tax year, a(n) ____________________ account is created.;829. CO #17;If there is a balance in the excess loss account when a subsidiary?s stock is;sold, the balance is recognized as ____________________.;830. CO #18;The consolidated return rules combine the members? transactions involving;items when computing consolidated taxable income.;831. CO #19;In computing consolidated taxable income, a charitable contribution is an;example of a(n) ____________________ item.;832. CO #20;In computing consolidated taxable income, the profit/loss from a sale between;Subsidiary and Parent is an example of a(n) ____________________ item.;833. CO #21;In computing consolidated taxable income, the purchase of database services by;Subsidiary from Parent is an example of a(n) ____________________ transaction.;834. CO #22;The ____________________ rules can limit the net operating loss deduction;claimed on a Federal consolidated return.;835. CO #23;When both apply, the ? 382 NOL limitation rules override the;limits.;836. CO #24;The capital gain/loss of the affiliates is an example of an item that is;computed on a ____________________ basis on a Federal corporate income tax;consolidated return.;837. CO #25;The casualty/theft gain/loss of the affiliates is an example of an item that is;computed on a ____________________ basis on a Federal corporate income tax;consolidated return.;838. CO #26;If one member sells an asset with a realized loss to another member of an;affiliated group, any loss on the transaction is not recognized at that time;such a deferral applies the ____________________ rule.;839. CO #27;In the year that the group terminates its consolidation election, a;consolidated group?s deferred gain from an intercompany asset sale between;affiliates is recognized in full, under the ____________________ rule.;840. PR #1;ParentCo?s controlled group includes the following members. ParentCo owns all;of the stock in each of the listed entities. Which entities can join ParentCo;in a consolidated return?;?;SubCoA, a;U.S. manufacturer.;?;SubCoB, a;manufacturer incorporated in France.;?;SubCoC, a;U.S. S corporation.;?;SubCoD, a;U.S. partnership.;?;SubCoE, a;U.S. charity.;?;SubCoF, a;U.S. manufacturer incorporated in Puerto Rico.;?;SubCoG, a;U.S. manufacturer that claims a deduction for its production activities;(DPAD).;?;SubCoH, a;U.S. limited liability company (LLC).;842. PR #3;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;taxable income tax-sharing method. Dollar amounts are listed in millions;and a 35% marginal income tax rate applies.;Parent;SubOne;SubTwo;SubThree;Consolidated;Ordinary;income;$700;$100;$ 60;($30);$830;Capital;gain/loss;?0?;?0?;20;(5);15;?1231 gain/loss;130;?0?;(55);?0?;75;Separate;taxable incomes;$830;$100;$;25;($30), with a $5 capital loss carryover;Consolidated;taxable income;$920;Consolidated;tax liability;$322;Energy tax;credit, from SubOne;(10);Net tax due;$312;843. PR #4;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.;Parent;SubOne;SubTwo;SubThree;Consolidated;Ordinary;income;$700;$100;$60;($30);$830;Capital;gain/loss;?0?;?0?;20;(5);15;? 1231 gain/loss;130;?0?;(55);?0?;75;Separate;taxable incomes;$830;$100;$25;($30), with a $5 capital loss carryover;Consolidated;taxable income;$920;Consolidated;tax liability;$322;Energy tax;credit, from SubOne;(10);Net tax due;$;312;844. PR #5;TopCo owns all of the stock of BottomCo. Both taxpayers are subject to the;alternative minimum tax (AMT) this year for the first time, due to a dependence;on MACRS deductions. The corporations incurred no intercompany transactions;during the year. TopCo has a consolidation election in effect for the group.;If the affiliates were to file separate Forms 1120 this year, the following;amounts would be reported.;TopCo?s;adjusted current earnings;$2,000,000;TopCo?s AMT;income before the ACE adjustment;900,000;BottomCo?s;adjusted current earnings;500,000;BottomCo?s;AMT income before the ACE adjustment;1,000,000;a.;Compute the;ACE adjustment for the consolidated group.;b.;Comment on;the effects of the consolidation election on the companies? AMT liabilities.

 

Paper#59227 | Written in 18-Jul-2015

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