Question 1

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?

Accepted Answer

For a corporation to file consolidated tax returns, it must own at least 80% of the total voting power and total value of the stock of the subsidiary.

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

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 in which a corporation files a separate tax return or files a consolidated tax return with another affiliated group.

Question 4

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 5

Identify which of the following statements is true.

Accepted Answer

An affiliated group electing to file a consolidated return can indeed be composed of as few as two corporations.

Question 6

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 7

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 8

What issues determine whether an affiliated group exists?

Accepted Answer

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

Question 9

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

Accepted Answer

The answer of Explain the requirements a group of corporations...

Question 10

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 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

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.)

Accepted Answer

Since Cardinal Corporation acquired Bluebird Corporation on June 30, half of Bluebird's income (50%) for the year would be included in the consolidated return, as the acquisition occurred halfway through the year.

Question 13

Which of the following corporations is an includible corporation for purposes of filing a consolidated tax return?

Accepted Answer

S corporations and foreign corporations are not includible corporations for purposes of filing a consolidated tax return. Insurance companies may or may not be includible depending on certain factors such as ownership structure. However, car manufacturing corporations are generally considered includible corporations for purposes of filing a consolidated tax return.

Question 14

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

Accepted Answer

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

Question 15

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.)

Accepted Answer

Since Cardinal Corporation acquired all of Bluebird Corporation's stock on June 30 and they file a consolidated return, 100% of Cardinal's income for the entire calendar year will be included in the consolidated return.

Question 16

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 17

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.

Accepted Answer

Ajak Corporation owns 85% of Utech Corporation, which owns 35% of Tech Corporation. Therefore, Ajak Corporation indirectly owns 85% x 35% = 29.75% of Tech Corporation. Additionally, Ajak Corporation owns 50% of Tech Corporation directly. Therefore, Ajak Corporation owns a total of 79.75% of Tech Corporation. Since Tech Corporation owns 75% of Baxter Corporation, this means that Ajak Corporation indirectly owns 59.8125% (79.75% x 75%) of Baxter Corporation. This meets the affiliated group ownership threshold of 50%. The only corporations directly owned by Ajak Corporation are Utech and Tech, so the affiliated group consists of Ajak, Tech, and Utech Corporations. Therefore, choice C is the correct answer.

Question 18

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

Accepted Answer

Closely held corporations are entitled to join in a consolidated tax return without making a special election. This means that if the corporations meet the IRS guidelines for being closely held, they can file one tax return as a group instead of each filing separate returns. The other options listed - corporations exempt from tax under Sec. 501, real estate investment trusts, and foreign corporations - would require a special election to join in a consolidated tax return.

Question 19

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 20

Identify which of the following statements is true.

Accepted Answer

The check-the-box regulations allow partnerships and LLCs to elect to be taxed as C corporations.

Quiz 8: Consolidated Tax Returns

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?

The election to file a consolidated return is made annually.

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.

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

Identify which of the following statements is true.

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

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

What issues determine whether an affiliated group exists?

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

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

Which of the following corporations is an includible corporation for purposes of filing a consolidated tax return?

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

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.

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

Identify which of the following statements is true.