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Question;845. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #6;Calendar year Parent Corporation acquired all of the stock of SubCo on January;1, Year 1, for $400,000. The subsidiary?s operating gains and losses are shown;below. In addition, a $30,000 dividend is paid early in Year 2.;Complete the following chart, indicating the appropriate stock basis and excess;loss account amounts.;Year;Operating;Gain/Loss;Stock;Basis;Excess Loss;Account;1;($100,000);?;?;2;($200,000);?;?;3;$250,000;?;?;846. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #7;LargeCo files on a consolidated basis with LittleCo. The subsidiary was;acquired for $400,000 on January 1, Year 1, and it paid a $75,000 dividend to;LargeCo at the end of both Year 2 and Year 3.;a.;Given the;following information about the subsidiary?s operating results, derive the;requested amounts as of December 31 of each year. The group files using a;calendar year.;LittleCo?s;LargeCo?sInvestment in LittleCo;Year;OperatingGain/(Loss);StockBasis;Excess LossAccount;1;($125,000);?;?;2;($300,000);?;?;3;$50,000;?;?;b.;LargeCo sold;LittleCo to an unrelated competitor for $600,000 on December 31, Year 3. How;will LargeCo account for this sale?;847. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #8;In the current year, Parent Corporation provided advertising services to its;100%-owned subsidiary, SubCo, under a contract that requires no payments to;Parent until next year. Both parties use the accrual method of tax accounting;and a calendar tax year. The services that Parent rendered were valued at;$250,000. In addition, Parent received $20,000 of interest payments from;SubCo., relative to an arm?s length note between them.;Including these transactions, Parent?s taxable income for the year amounted to;$400,000. SubCo reported $200,000 separate taxable income. Derive the group?s;consolidated taxable income, using the format of Figure 8-2.;Separate;Taxable;Income;Adjustments;Post-;Adjustment;Amounts;ParentCo;Information;SubCo;Information;Group-Basis;Transactions;Intercompany;Events;Consolidated;Taxable Income;NOTES;848. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #9;Compute consolidated taxable income for the calendar year Holloway Group, which;elected consolidated status immediately upon creation of the two member;corporations in January 2010. All recognized income related to the data;processing services of the firms. No intercompany transactions were completed;during the indicated years.;Tax Year;Holloway Corporation;Olson Corporation;2010;$250,000;($ 30,000);2011;250,000;(120,000);2012;250,000;(180,000);2013;250,000;40,000;849. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #10;Compute consolidated taxable income for the calendar year Whitman Group, which;elected consolidated status immediately upon creation of the two member;corporations in January 2009. All recognized income related to the data;processing services of the firms. No intercompany transactions were completed;during the indicated years.;Tax Year;Whitman Corporation;Draper Corporation;2010;$250,000;$ 10,000;2011;250,000;(170,000);2012;250,000;(490,000);2013;250,000;75,000;850. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #11;Parent Corporation, SubOne, and SubTwo have filed consolidated returns since;2010. All of the entities were incorporated in 2009. None of the group members;incurred any capital gain or loss transactions during 2009-2012, nor did they;make any charitable contributions. Taxable income computations for the members;are listed below.;Parent?s;SubOne?s;SubTwo?s;Consolidated;Taxable;Taxable;Taxable;Taxable;Year;Income;Income;Income;Income;2009*;$100,000;$100,000;$260,000;N/A;2010**;$100,000;$100,000;($ 60,000);$140,000;2011**;$150,000;($130,000);($250,000);?;2012**;$100,000;$120,000;$300,000;?;* Separate return year.;** Consolidated return year.;a.;How much of;the 2011 loss is apportioned to SubOne and SubTwo? How is this loss treated;in generating a refund of prior tax payments?;b.;Why would;Parent consider electing to forgo the carryback of the 2011 consolidated NOL?;c.;In this;light, analyze the election to consolidate.;851. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #12;The group of Parent Corporation, SubOne, and SubTwo has filed a consolidated;return since 2010. The first two entities were incorporated in 2009, and SubTwo;came into existence in 2010 through an asset spin-off from Parent. Taxable;income computations for the members are shown below. None of the group members;incurred any capital gain or loss transactions during 2009-2012, nor did they;make any charitable contributions.;Describe the treatment of the group?s 2011 consolidated NOL. Hint: Apply the offspring rule.;Parent?s;SubOne?s;SubTwo?s;Consolidated;Taxable;Taxable;Taxable;Taxable;Year;Income;Income;Income;Income;2009*;$200,000;$ 70,000;-;$270,000;2010*;$ 90,000;$ 20,000;($ 40,000);$ 70,000;2011*;$ 90,000;($ 80,000);($ 40,000);?;2012*;$ 90,000;$100,000;$210,000;?;* Consolidated return year.;852. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #13;Parent Corporation?s current-year taxable income included $100,000 net profit;from operations and a $30,000 net long-term capital gain. Parent also made a;$22,000 contribution to State University. SubCo produced $85,000 of income from;operations and incurred a $25,000 net short-term capital loss.;Use the computational worksheet of Figure 8.2 to derive the group members?;separate taxable incomes and the group?s consolidated taxable income.;Separate;Taxable;Income;Adjustments;Post-;Adjustment;Amounts;ParentCo;Information;SubCo Information;Group-Basis;Transactions;Intercompany;Events;Consolidated;Taxable Income;NOTES;853. CHAPTER 8?CONSOLIDATED TAX RETURNS Question PR #14;Except for the ? 199 domestic production activities deduction (DPAD), the;members of an electing affiliated group report the following data. Compute the;group?s DPAD for calendar tax year 2011.;Affiliate;Taxable Income;Before DPAD;($ Million);Qualified Production;Activities Income;[QPAI] ($ Million);W-2 Wages;($ Million);Rad, Parent;30;60;60;Sol;(20);40;30;Tat;15;20;10;Totals;25;120;100;854. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #1;How many consolidated tax returns are filed annually? What types of taxpayer do;they represent?;855. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #2;List some of the non-tax reasons that groups of corporations form conglomerates;and may be eligible also to file consolidated Federal income tax returns.;856. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #3;Where are the controlling Federal income tax rules regarding consolidated tax;returns to be found? What is the general philosophy of those rules?;857. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #4;The consolidated income tax return rules apply only for Federal tax purposes.;Financial accounting rules can be quite different from the corresponding tax;rules, but the tax professional should be familiar with both sets of;requirements. Describe the major differences between the book and tax treatment;for the conglomerate?s reporting of;a.;Goodwill.;b.;The entities;included on the report.;858. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #5;Outline the major advantages and disadvantages of filing Federal corporate;income tax returns on a consolidated basis. Limit your comments to the income;tax effects of the election.;859. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #6;The U.S. states apply different rules in treating Federal consolidated groups;for corporate income tax purposes. Describe three different treatments that the;states currently use.;860. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #7;How do the Federal consolidated return requirements differ in identifying an;affiliated group rather than a parent-subsidiary controlled group?;861. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #8;To be part of a Federal consolidated return, an entity cannot be ineligible to;join an affiliated group. List three or more business entities that cannot be;part of a Federal consolidated tax return group.;862. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #9;When a corporate group elects to file Federal income tax returns on a;consolidated basis, it is subject to several tax return filing requirements for;its first and subsequent tax years. List the most important of those;requirements.;863. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #10;What tax accounting period is used by the members of a Federal consolidated;group?;864. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #11;In a Federal consolidated tax return group, who is responsible to pay the tax;liability?the parent, the subsidiaries, or both? How are these tax-payable;amounts determined?;865. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #12;Discuss how a parent corporation computes its stock basis for a subsidiary that;joins in a Federal consolidated income tax return.;866. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #13;The parent;computes a basis in the stock of its subsidiary that is part of a Federal;consolidated tax return group. This stock basis cannot be a negative amount.;Explain.;867. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #14;Describe the general computational method used by a Federal consolidated group;in computing taxable income.;868. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #15;List three ?intercompany transactions? of a Federal consolidated income tax;group. ParentCo owns all of the stock of both SubOne and SubTwo.;869. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #16;A Federal consolidated group reports a net operating loss for the year. How is;this amount allocated to the various group members? Why is this allocation;important?;870. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #17;The consolidated tax return regulations use ?SRLY? limitations with respect to;losses of a subsidiary that can be deducted on the consolidated return.;Describe the various SRLY rules that might apply to a consolidated group;member?s losses.;871. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #18;The ?SRLY? rules for consolidated tax returns are designed to keep corporations;from ?trafficking? their net operating losses. Explain.;872. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #19;Certain tax return items are computed on a group basis when a Federal;consolidated return election is in place. List five or more of these;group-basis items.;873. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #20;How does a consolidated Federal income tax group compute its domestic;production activities deduction (DPAD)? Assume that all of the affiliates in a;consolidated group conduct allowable manufacturing activities.;874. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #21;In the context of a Federal consolidated income tax return, describe the;matching rule and the acceleration rule. The Regulations apply these rules to;some of the intercompany transactions of an affiliated group.;875. CHAPTER 8?CONSOLIDATED TAX RETURNS Question ES #22;Forming a Federal consolidated tax return group is a discretionary action by;eligible affiliates. List several tax attributes and situations that might make;a subsidiary an attractive partner for a parent corporation on a consolidated;return.

 

Paper#59228 | Written in 18-Jul-2015

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