Question 1

Explain the requirements a group of corporations must meet in order to elect to file a consolidated return.

Accepted Answer

The parent corporation must own at least 80% of the total voting power and at least 80% of the total value of all outstanding stock in at least one includible corporation.Each additional corporation that is included must also meet the two 80% stock ownership rules either directly or indirectly.Eligible affiliated groups must make a consolidated return election by filing a timely consolidated tax return.

Question 2

The election to file a consolidated return is made annually.

Accepted Answer

The election to file a consolidated tax return is not made annually; once made, it applies to the current tax year and all subsequent tax years until the election is formally revoked.

Question 3

Cardinal and Bluebird Corporations both use a calendar year as their tax year.At the close of business on June 30,Cardinal Corporation buys all of Bluebird Corporation's stock.If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year,what portion of Bluebird's income will be included in the consolidated return? (Assume all months have 30 days.)
A)100%
B)50%
C)0%
D)none of the above

Accepted Answer

Since Cardinal Corporation bought all of Bluebird Corporation's stock on June 30, Bluebird's income will be included in the consolidated return for the period January 1 - June 30. Therefore, 50% of Bluebird's income will be included in the consolidated return.

Question 4

Toby owns all of the single class of stock of James and Mony Corporations.James Corporation owns all of Volt Corporation's stock.Mony owns all of Wegnin Corporation.Mony and Wegnin Corporations are foreign corporations.Toby,James,and Volt are domestic corporations.Are the corporations part of an affiliated group?

Accepted Answer

The answer of Toby owns all of the single class...

Question 5

A Canadian subsidiary cannot file as part of the consolidated group with its U.S.parent.

Accepted Answer

The answer of A Canadian subsidiary cannot file as part...

Question 6

Identify which of the following statements is true.
A)If 100% of the stock of two corporations is owned by the same individual,the two corporations are eligible to file a consolidated return.
B)The check-the-box regulations permit partnership and LLCs to elect C corporation tax treatment.
C)A group of corporations that meets the parent-subsidiary controlled group requirements is always eligible to file a consolidated return.
D)All of the above are false.

Accepted Answer

Option A is false because both corporations must have the same parent corporation to be eligible for a consolidated return. Option C is false because a group of corporations that meets the parent-subsidiary controlled group requirements may not always elect to file a consolidated return. Option B is true because check-the-box regulations do permit partnership and LLCs to elect C corporation tax treatment.

Question 7

Ajak Corporation owns 85% of the single class of Utech Corporation stock.Utech Corporation owns 35% of Tech Corporation.Ajak Corporation also owns 50% of Tech Corporation,and Tech Corporation owns 75% of Baxter Corporation.
A)Ajak,Tech,Utech,and Baxter Corporations are an affiliated group.
B)Ajak,Tech,and Baxter Corporations are an affiliated group.
C)Ajak,Tech,and Utech Corporations are an affiliated group.
D)None of the above are correct.

Accepted Answer

Ajak, Tech, and Utech Corporations are an affiliated group because Ajak owns 85% of Utech Corporation and 50% of Tech Corporation. Also, Utech Corporation owns 35% of Tech Corporation, which means that Ajak indirectly owns more than 50% of Tech Corporation through Utech Corporation. Therefore, Ajak, Tech, and Utech Corporations are an affiliated group. However, Baxter Corporation is not part of this affiliated group because it is only indirectly owned by Tech Corporation, which is only indirectly owned by Ajak Corporation.

Question 8

Diana Corporation owns stock of Tomika Corporation.For Diana and Tomika to qualify for the filing of consolidated returns,at least what percentage of Tomika's total voting power and total value of stock must be directly owned by Diana?
A) 
B) 
C) 
D)

Accepted Answer

The answer of Diana Corporation owns stock of Tomika Corporation.For...

Question 9

Which of the following corporations is entitled to join in a consolidated tax return without making a special election?
A)corporations exempt from tax under Sec.501
B)real estate investment trusts
C)closely held corporations
D)foreign corporations

Accepted Answer

Closely held corporations are entitled to join in a consolidated tax return without making a special election. Other types of corporations, including those exempt from tax under Sec. 501, real estate investment trusts, and foreign corporations, generally require a special election to participate in a consolidated tax return.

Question 10

To be an affiliated group,the parent corporation must directly own at least 80% of another group member.

Accepted Answer

According to the IRS, for a group to be considered an affiliated group, the parent corporation must directly own at least 80% of another group member.

Question 11

Jeffrey Corporation owns 85% of Placer Corporation and 25% of Mercer Corporation.Placer Corporation owns 60% of Mercer Corporation and 45% of Tyson Corporation.Jeffrey Corporation also owns 85% of Apple Corporation and Apple Corporation owns 30% of Tyson Corporation.Which of these corporations are members of an affiliated group if all percentages represent voting power and value held by the respective corporations?

Accepted Answer

The answer of Jeffrey Corporation owns 85% of Placer Corporation...

Question 12

Toby Corporation owns 85% of James Corporation's single class of stock and 35% of Mony Corporation's single class of stock.James Corporation owns 45% of Mony's stock.The remainder of James and Mony's stock is owned by 80 individual shareholders.Are the corporations part of an affiliated group,and can they elect to file a consolidated tax return?

Accepted Answer

The answer of Toby Corporation owns 85% of James Corporation's...

Question 13

What issues determine whether an affiliated group exists?

Accepted Answer

The answer of What issues determine whether an affiliated group...

Question 14

What types of corporations are not includible corporations for purposes of determining whether or not an affiliated group exists?

Accepted Answer

The answer of What types of corporations are not includible...

Question 15

What are the differences between a controlled group and an affiliated group?

Accepted Answer

The answer of What are the differences between a controlled...

Question 16

Cardinal and Bluebird Corporations both use a calendar year as their tax year.At the close of business on June 30,Cardinal Corporation buys all of Bluebird Corporation's stock.If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year,what portion of Cardinal's income will be included in the consolidated return? (Assume all months have 30 days.)
A)100%
B)50%
C)0%
D)none of the above

Accepted Answer

Since Cardinal Corporation buys all of Bluebird Corporation's stock and they file a consolidated return, 100% of Cardinal's income for the entire year will be included in the consolidated return, regardless of the acquisition date.

Question 17

Which of the following corporations is an includible corporation for purposes of filing a consolidated tax return?
A)insurance companies
B)S corporations
C)car manufacturing corporation
D)foreign corporations

Accepted Answer

Only the car manufacturing corporation is an includible corporation for purposes of filing a consolidated tax return. Insurance companies and foreign corporations have specific requirements and limitations for filing a consolidated return, and S corporations are not eligible to be included in a consolidated return.

Question 18

Brother-sister controlled groups can elect to file a consolidated tax return.

Accepted Answer

Brother-sister controlled groups cannot elect to file a consolidated tax return because consolidated returns are generally limited to parent-subsidiary controlled groups.

Question 19

A separate return year is a corporation's tax year for which it files a separate tax return or files a consolidated tax return with another affiliated group.

Accepted Answer

A separate return year is a tax year for which a corporation files a separate tax return or files a consolidated tax return with another affiliated group. This is in contrast to a fiscal year, which is a 12-month period that a company uses for accounting and financial reporting purposes.

Question 20

Identify which of the following statements is true.
A)To be part of an affiliated group,a corporation must be at least 80% directly owned by another group member.
B)Only common stock is considered when determining if the 80% ownership test is met for affiliated group eligibility.
C)An affiliated group electing to file a consolidated return may be composed of as few as two corporations.
D)All of the above are false.

Accepted Answer

Option A is incorrect because to be part of an affiliated group, a corporation must be at least 80% owned (directly or indirectly) by other members of the group. Option B is incorrect because both common and preferred stock are considered when determining if the 80% ownership test is met. Option C is correct because an affiliated group electing to file a consolidated return may be composed of as few as two corporations. Option D is incorrect because option C is true.

Quiz 15 Consolidated Tax Returns

Explain the requirements a group of corporations must meet in order to elect to file a consolidated return.

The election to file a consolidated return is made annually.

A Canadian subsidiary cannot file as part of the consolidated group with its U.S.parent.

Identify which of the following statements is true.

Ajak Corporation owns 85% of the single class of Utech Corporation stock.Utech Corporation owns 35% of Tech Corporation.Ajak Corporation also owns 50% of Tech Corporation,and Tech Corporation owns 75% of Baxter Corporation.

Diana Corporation owns stock of Tomika Corporation.For Diana and Tomika to qualify for the filing of consolidated returns,at least what percentage of Tomika's total voting power and total value of stock must be directly owned by Diana?

Which of the following corporations is entitled to join in a consolidated tax return without making a special election?