The benefits of filing a consolidated tax return include all of the following except
A) Intercompany profits are not taxed until realized.
B) Intercompany profits are deferred.
C) Intercompany dividends are not taxable.
D) Losses incurred by an affiliated company can be used to reduce taxable income earned by other members to that affiliated group.
E) Intercompany profits are taxed before realized, but intercompany losses are deferred.

Question

Quizplus · Accepted Answer

The statement "Intercompany profits are taxed before realized, but intercompany losses are deferred" is incorrect. In a consolidated tax return, intercompany profits are not taxed until realized, and intercompany losses can be used to reduce taxable income earned by other members of the affiliated group. Thus, option E is the statement that is not a benefit of filing a consolidated tax return.

The Benefits of Filing a Consolidated Tax Return Include All