Create, Inc., a domestic corporation, owns 90% of Vinyl, Ltd., a foreign corporation and Digital, Inc., a domestic corporation. Create also owns 60% of Record, Inc., a domestic corporation. Create receives no distributions from any of these corporations. Which of these entities' net income are included in Create's Federal tax return for the current year assuming Create elects to include all eligible entities in its consolidated Federal income tax return?

Question

Quizplus · Accepted Answer

Create and Digital, Inc. are included in the consolidated Federal income tax return because they are domestic corporations. Vinyl, Ltd., being a foreign corporation, is not eligible for inclusion. Record, Inc. is not included because Create does not own at least 80% of it, which is required for consolidation.