Question 1

The losses of a consolidated group member are subject to both the SRLY rules and a § 382 limitation. When both limitations apply, the § 382 restrictions override the SRLY rules for this affiliate.

Accepted Answer

When both the SRLY rules and a § 382 limitation apply, the § 382 restrictions take precedence over the SRLY rules. Therefore, the losses of the consolidated group member will be subject to the § 382 limitation rather than the SRLY rules.

Question 2

When a member departs from a consolidated group, it leaves behind any NOLs that it generated while in the group. The parent corporation and remaining affiliates apply those NOLs against future consolidated taxable income.

Accepted Answer

The answer of When a member departs from a consolidated...

Question 3

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?

Accepted Answer

When a group elects to file their Federal corporate income tax returns on a consolidated basis, each member becomes jointly and severally liable for the consolidated tax liability. This can be more restrictive for members who may have had a lower tax liability if they filed on their own. Therefore, (D) Members who are liable for the consolidated tax liability becomes more restrictive. The other options listed do not necessarily become more restrictive with this election.

Question 4

How must the IRS collect the liability for Federal taxes from among a consolidated group?

Accepted Answer

The answer of How must the IRS collect the liability...

Question 5

Which of the following potentially is a disadvantage of electing to file a Federal corporate income tax consolidated return?

Accepted Answer

Electing to file a Federal corporate income tax consolidated return may result in additional administrative costs in complying with the election. The other options (A, B, and C) are potential advantages of filing a consolidated return.

Question 6

Conformity among the members of a consolidated group must be implemented for which of the following tax items?

Accepted Answer

Conformity in a consolidated group is required for the tax year-end to ensure that all members of the group report their income and expenses for the same period, facilitating the consolidation of financial statements and tax returns.

Question 7

The Rack, Spill, 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 an $18,000 penalty is attributable solely to Ton. ​
At present, only Rack 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 Rack to satisfy the outstanding liabilities of the consolidated group?

Accepted Answer

The answer of The Rack, Spill, and Ton Corporations file...

Question 8

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

Accepted Answer

When a group files a consolidated tax return, the foreign tax credit is calculated on a consolidated basis. This means that the group can offset foreign taxes paid by one member against the foreign income of another member. As a result, the foreign tax credit of the consolidated group can be greater than the sum of the credits of the group members if they had filed separately.

Question 9

Which of the following is not generally a disadvantage of filing Federal corporate income tax returns on a consolidated basis?

Accepted Answer

Advantage mentioned, not a disadvantage.

Question 10

Cooper Corporation joined the Duck consolidated Federal income tax return group, when Cooper held a $1 million NOL carryforward. In its first year as a part of the Duck group, Cooper generated a $150,000 taxable loss. For that year, Duck cannot deduct any of Cooper's NOL in computing consolidated taxable income.

Accepted Answer

When a subsidiary joins a consolidated group, any NOL carryforwards that the subsidiary has cannot be used by the group until the subsidiary generates taxable income on its own. In this case, Cooper generated a taxable loss in its first year as part of the group, which means that the group cannot deduct any of Cooper's NOL in computing consolidated taxable income.

Question 11

Which of the following potentially is a disadvantage of electing to file a Federal consolidated corporate income tax return?

Accepted Answer

When filing a Federal consolidated corporate income tax return, recognition of losses from certain intercompany transactions is deferred, which can be a disadvantage as it delays the ability to utilize those losses for tax benefits.

Question 12

A Federal consolidated filing group aggregates its separate charitable contributions for the tax year, deductions for which then are subject to an annual limitation of 10% of consolidated taxable income.

Accepted Answer

This is true based on the IRS guidelines for consolidated filing groups. Charitable contributions are combined for the group and subject to a limitation of 10% of the group's consolidated taxable income.

Question 13

Cooper Corporation joined the Duck consolidated Federal income tax return group, when Cooper held a $1 million NOL carryforward. In its first year as a part of the Duck group, Cooper generated a $150,000 operating profit. For that year, Duck can deduct only $150,000 of Cooper's NOL in computing consolidated taxable income.

Accepted Answer

This is because the consolidated taxable income of Duck group includes the operating profit of Cooper, but the NOL carryforward can only offset taxable income up to the amount of the NOL itself, which in this case is $150,000. Therefore, Duck can deduct only $150,000 of Cooper's NOL in computing consolidated taxable income.

Question 14

A penalty can be assessed by the IRS if the parent corporation does not keep good records to support the computation of a subsidiary's stock basis.

Accepted Answer

The IRS may assess a penalty if the parent corporation does not keep good records to support the computation of a subsidiary's stock basis, which is required for tax purposes.

Question 15

How do the members of a Federal consolidated group split among themselves the benefits of the lower tax brackets on the first $75,000 of taxable income?

Accepted Answer

The members of a Federal consolidated group split among themselves the benefits of the lower tax brackets on the first $75,000 of taxable income according to an internal tax-sharing agreement. This agreement is typically negotiated and agreed upon among the members of the group and is based on their respective ownership interests. It is not subject to approval by the IRS, although the IRS may examine the agreement during an audit to ensure that it is consistent with the provisions of the Internal Revenue Code.

Question 16

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

Accepted Answer

Only U.S. corporations can file Federal income tax returns on a consolidated basis. The other entities listed are not eligible because they are either foreign or structured as a limited partnership.

Question 17

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

Accepted Answer

DEarnings and Profits (E & P) are important for determining dividend distributions and other tax-related matters. In a Federal consolidated group, each member maintains its own E & P account (A), and the consolidated E & P is computed as the sum of the E & P balances of each of the group members, computed on the last day of the tax year (D). This approach allows for the accurate tracking of each member's contribution to the group's overall E & P while still recognizing the group's consolidated financial position.

Question 18

Which of the following is not a requirement that must be met before a group files a consolidated return?

Accepted Answer

While the group members must have a common tax year end, they do not necessarily have to share the same inventory accounting method. However, all other options listed are necessary requirements for filing a consolidated return.

Question 19

Which of the following entities is eligible to join in a Federal consolidated return?

Accepted Answer

Only corporations that are members of the same affiliated group and meet certain other criteria are eligible to file a consolidated federal tax return. A corporation operating in multiple states can meet this criteria if it meets the other requirements. Sole proprietors, retirement plans, and foreign partnerships are not eligible to join a consolidated return.

Question 20

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

Accepted Answer

A U.S. C corporation can file Federal income tax returns on a consolidated basis with its domestic subsidiaries if it owns at least 80% of the subsidiary's stock. The other entities listed (B, C, D) are not eligible for consolidated tax filing because they are either not taxable entities, not corporations, or not domestic entities.

Quiz 8: Consolidated Tax Returns

The losses of a consolidated group member are subject to both the SRLY rules and a § 382 limitation. When both limitations apply, the § 382 restrictions override the SRLY rules for this affiliate.

When a member departs from a consolidated group, it leaves behind any NOLs that it generated while in the group. The parent corporation and remaining affiliates apply those NOLs against future consolidated taxable income.

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?

How must the IRS collect the liability for Federal taxes from among a consolidated group?

Which of the following potentially is a disadvantage of electing to file a Federal corporate income tax consolidated return?

Conformity among the members of a consolidated group must be implemented for which of the following tax items?

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

Which of the following is not generally a disadvantage of filing Federal corporate income tax returns on a consolidated basis?

Which of the following potentially is a disadvantage of electing to file a Federal consolidated corporate income tax return?

A Federal consolidated filing group aggregates its separate charitable contributions for the tax year, deductions for which then are subject to an annual limitation of 10% of consolidated taxable income.

A penalty can be assessed by the IRS if the parent corporation does not keep good records to support the computation of a subsidiary's stock basis.

How do the members of a Federal consolidated group split among themselves the benefits of the lower tax brackets on the first $75,000 of taxable income?

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?

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

Which of the following is not a requirement that must be met before a group files a consolidated return?

Which of the following entities is eligible to join in a Federal consolidated return?

Which of the following entities is eligible to file Federal income tax returns on a consolidated basis?