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Question;769. MC #1;Which of the following potentially is a disadvantage of electing to file a;Federal consolidated corporate income tax return?;a.;Recognition of losses from certain intercompany transactions is deferred.;b. The taxation of intercompany;dividends is not eliminated.;c. The tax basis of investments in the;stock of subsidiaries is unaffected by members contributing to consolidated;taxable income.;d. The ? 1231 loss of one member is not;offset against the ? 1231 gain of another member of the group.;770. MC #2;Which of the following is not;generally a disadvantage of filing Federal corporate income tax returns on a;consolidated basis?;a.;Compliance costs usually are higher when a consolidation election is in effect.;b. Realized losses from transactions;between affiliates are not recognized immediately.;c. Capital gains from one affiliate can;be offset by the capital losses from another. This can reduce the tax;liabilities of the group as a whole.;d. The election generally is binding for;future tax years.;771. MC #3;Which of the following potentially is a disadvantage;of electing to file a Federal corporate income tax consolidated return?;a.;Additional administrative costs in complying with the election.;b. Deferral of gains realized in;transactions between group members.;c. Increased basis in the stock of a;subsidiary that generates annual taxable income.;d. Dividends received deduction for;payments from a subsidiary to the group?s parent.;772. MC #4;Which of the following is not a;requirement that must be met before a group files a consolidated return?;a.;None of the corporations can be ineligible under the Code to file on a;consolidated basis with the others.;b. All of the corporations must be;members of an affiliated group.;c. None of the group members can use the;LIFO method of accounting for inventories.;d. The group members must share a common;tax year end.;773. MC #5;Which of the following tax effects becomes more;restrictive if an election is made to file a group?s Federal corporate income;tax returns on a consolidated basis?;a.;Choice of members? tax year ends.;b. Use of the lower tax rate brackets.;c. Use of the $40,000 AMT exemption.;d. Choice of members? tax accounting;methods;774. MC #6;Members of a controlled group share all but which of the following tax;attributes?;a.;The lower tax rates on the first $75,000 of taxable income.;b. The tax accounting inventory method;used by the members.;c. The $40,000 AMT exemption.;d. The floor on the accumulated earnings;credit.;775. MC #7;Which of the following is eligible to file Federal income tax returns on a;consolidated basis?;a.;U.S. corporation engaged in the oil and gas industry.;b. Japanese corporation engaged in;multinational operations, including two-thirds of its activities in the U.S.;c. Japanese corporation engaged in;multinational operations, including one-third of its activities in the U.S.;d. Limited liability company operating;exclusively in Texas.;776. MC #8;Which of the following is eligible to join in a Federal consolidated return?;a.;A sole proprietor with annual sales of more than $50 million.;b. A U.S. corporation?s ? 401(k) plan.;c. A partnership organized in Germany.;d. A corporation that operates in seven;different U.S. states.;777. MC #9;The Rub, Sal, and Ton Corporations file Federal income tax returns on a;consolidated basis. The group?s tax return currently is under audit. Under a;valid tax-sharing agreement, each corporation is liable for one-third of the;group?s consolidated tax liability. The affiliates have agreed with the auditor;that the group?s unpaid liability for the year is $90,000. Because of an;incorrect tax return position, another $3,000 in interest and a $1,800 penalty;is attributable solely to Ton.;At present, only Rub is solvent and has the cash with which to make such a tax;payment. What is the maximum amount for which the government could be;successful in forcing Rub to satisfy the outstanding liabilities of the;consolidated group?;a.;$4,800.;b. $90,000.;c. $91,800.;d. $93,000.;e. $94,800.;778. MC #10;How must the IRS collect the liability for Federal taxes from among a;consolidated group?;a.;Against the parent of the group.;b. According to the members? relative;net asset holdings.;c. According to the members? current;internal tax-sharing agreement.;d. Against the member of the group that;generated the tax.;e. No particular order of collection is;prescribed by IRS rules.;779. MC #11;How do the members of a consolidated group split among themselves the benefits;of the lower tax brackets on the first $75,000 of taxable income?;a.;According to their relative net asset holdings.;b. According to an internal tax-sharing;agreement.;c. According to an internal tax-sharing;agreement, which may be modified by the IRS upon audit.;d. According to a tax-sharing agreement;that must be approved by the IRS by the end of the first quarter of the tax;year.;780. MC #12;Conformity among the members of a consolidated group must be implemented for;which of the following tax items?;a.;Use of foreign tax payments (i.e., as a credit or deduction).;b. Tax accounting method (i.e., cash or;accrual).;c. Inventory accounting method (e.g.;FIFO or LIFO).;d. Election to claim the ? 179;depreciation expensing amount.;e. Tax year end.;781. MC #13;How are the members of a Federal consolidated group affected by computations;related to E & P?;a.;E & P is computed solely on a consolidated basis.;b. Each member keeps its own E & P;account.;c. Members? E & P balances are;frozen as long as the consolidation election is in place.;d. Consolidated E & P is computed as;the sum of the E & P balances of each of the group members.;782. MC #14;ParentCo acquired all of the stock of SubCo on January 1, 2011, for $1,000,000.;The parties immediately elected to file consolidated income tax returns. SubCo;generated taxable income of $150,000 for 2011 and paid a dividend of $100,000;to ParentCo. In 2012, SubCo generated an operating loss of $350,000, and in;2013 it produced taxable income of $75,000. As of the last day of 2013, what;was ParentCo?s basis in the stock of SubCo?;a.;$1,000,000.;b. $875,000.;c. $775,000.;d. $0.;783. MC #15;ParentCo purchased all of the stock of SubCo on January 1, 2011, for $500,000.;SubCo produced a loss for 2011 of $150,000 and distributed cash of $25,000 to;ParentCo. In 2012, SubCo generated a loss of $450,000, in 2013, it recognized;net income of $45,000. What is ParentCo?s capital gain or loss if it sells all;of its SubCo stock to a nongroup member on January 1, 2014, for $50,000?;a.;$10,000.;b. $50,000.;c. ($80,000).;d. ($50,000).;784. MC #16;ParentCo owned 100% of SubCo for the entire year, and both companies use the;accrual method of tax accounting. During the year, SubCo purchased $20,000 of;supplies from ParentCo. In addition, SubCo provided internal audit services to;ParentCo, which were worth $40,000. Including these transactions, ParentCo?s;separate taxable income was $75,000, and SubCo?s separate taxable income was;$100,000. What is the group?s consolidated taxable income for the year?;a.;$215,000.;b. $195,000.;c. $175,000.;d. $155,000.;785. MC #17;ParentCo owned 100% of SubCo for the entire year. ParentCo uses the accrual;method of tax accounting, whereas SubCo uses the cash method. During the year;SubCo sold raw materials to ParentCo for $35,000 under a contract that requires;no payment to SubCo until the following year.;Exclusive of this transaction, ParentCo had income for the year of $30,000, and;SubCo had income of $50,000. The group?s consolidated taxable income for the;year was;a.;$165,000.;b. $150,000.;c. $115,000.;d. $80,000.;786. MC #18;ParentCo and SubCo have filed consolidated returns since both entities were;incorporated in 2011. Taxable income computations for the members include the;following. Neither group member incurred any capital gain or loss transactions;during these years, nor did they make any charitable contributions.;ParentCo?s;SubCo?s;Taxable;Consolidated;Year;Taxable;Income;Income;Taxable;Income;2011;$100,000;$ 35,000;$135,000;2012;$100,000;($ 20,000);$ 80,000;2013;$100,000;($109,000);?;2014;$100,000;$190,000;?;The 2013 consolidated loss;a.;must be carried forward before it can be carried back.;b. must be carried forward, unless an;election to forgo carryforward is made by the parent.;c. must be carried back, unless an;election to forgo the carryback is made by the parent.;d. can be used only to offset SubCo?s;future income.;e. cannot be used to offset any of;ParentCo?s 2011 income.;787. MC #19;The consolidated net operating loss of the Parent Group includes all of the;following except;a.;Parent?s operating income/loss.;b. Parent?s passive activity;income/loss.;c. Parent?s charitable contributions.;d. Subsidiary?s operating income/loss.;788. MC #20;The Harris consolidated group reports a net operating loss (NOL) for the year.;The tax law works to;a.;Keep the consolidated group from benefiting when the election to consolidate is;motivated chiefly by tax reduction strategies.;b. Disallow any carrybacks of NOL;deductions.;c. Allow unused charitable contributions;a 20-year carryforward.;d. All of the above statements describe;effects of the consolidated return rules.;789. MC #21;ParentCo purchased 100% of SubCo?s stock on January 1, 2011, and the companies;have filed consolidated returns since then. Taxable income computations for the;members include the following. Neither group member incurred any capital gain;or loss transactions during these years, nor did they make any charitable;contributions.;ParentCo?s;SubCo?s;Taxable;Consolidated;Year;Taxable;Income;Income;Taxable;Income;2010;$100,000;$ 70,000;N/A;2011;$100,000;($ 70,000);$30,000;2012;$ 12,000;($ 20,000);?;2013;$100,000;$200,000;?;The 2012 net operating loss;a.;may be carried back to offset SubCo?s 2010 taxable income.;b. may be carried forward only and applied;against group income if so elected by ParentCo.;c. cannot be carried back against 2010;SubCo income, as consolidated returns were not filed.;d. either a or b, but not both.;790. MC #22;The Philstrom consolidated group reported the following taxable income amounts.;Parent owns all of the stock of both Junior and Minor. Determine the net;operating loss (NOL) that is apportioned to Junior.;Parent;($600,000);Junior;($400,000);Minor;$100,000;a.;$0. All NOLs of a consolidated group are apportioned to the parent.;b. $300,000.;c. $360,000.;d. $400,000.;791. MC #23;The Philstrom consolidated group reported the following taxable income amounts.;Parent owns all of the stock of both Junior and Minor. Determine the net;operating loss (NOL) that is apportioned to Minor.;Parent;($600,000);Junior;($400,000);Minor;$100,000;a.;$0. Minor did not report an NOL of its own.;b. $0. All NOLs of a consolidated group;are apportioned to the parent.;c. $100,000.;d. $300,000.

 

Paper#59276 | Written in 18-Jul-2015

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