Question 1

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.

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Question 2

Discuss how a parent corporation computes its stock basis for a subsidiary that joins in a Federal consolidated income tax return.

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Question 3

Describe the general computational method used by a Federal consolidated group in computing taxable income.

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Question 4

Gold and Bronze elect to form a Federal consolidated group. Gold, the parent entity, uses a calendar tax year while
Bronze's tax year ends on March 31. Which tax years) does the new consolidated group use?

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Question 5

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?

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Question 6

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.

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Question 7

Gold, Silver, and Bronze constitute a Federal consolidated tax return group. Which of the members is responsible to pay the tax liability-the parent, the subsidiaries, or both? How are these tax-payable amounts determined? Hint: Use the term tax-sharing agreement in your answer.

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Question 8

ParentCo owns all of the stock of both SubOne and SubTwo. List three "intercompany transactions" that might occur among the three members of the consolidated filing group.

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Question 9

The "SRLY" and § 382 limitation rules for Federal consolidated tax returns are designed to keep corporations from "trafficking" their net operating losses. These rules are restrictive and somewhat complex. Explain why these rules exist and how they interact if both apply in the same tax year.

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Question 10

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.

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Question 11

Parent's basis in the stock of Child, its subsidiary, is $1 million at the beginning of the year. Child's share of consolidated taxable income this year is a $1.25 million operating loss. Parent's basis in the Child stock now is zero. Explain.

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Question 12

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.

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Question 13

Members of the ABCD Federal consolidated group conduct various transactions with each other during the tax year.
These include the purchase/sale of land and depreciable assets, the licensing of intangible assets, and the conduct of service arrangements. How does the tax law account for these intercompany items? In your answer, be sure to use the terms matching rule and acceleration rule at least once each.

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Question 14

Certain business entities are ineligible to join an affiliated group and file a consolidated Federal income tax return.
List three or more entities that cannot be part of a Federal consolidated tax return group.

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Quiz 8: Consolidated Tax Returns