P and its wholly owned subsidiary S file a consolidated return on a calendar year basis.On February 1, 2012 P sells land to S for $30,000.P's basis in the land was $20,000.S held the land until July 20, 2013, whereupon it sold it to an unrelated party for $40,000.What amount and type of income should P report in the consolidated return for 2012?

Question

Quizplus · Accepted Answer

In a consolidated tax return, intercompany transactions are eliminated until the property is sold to an unrelated third party. Since S, a wholly owned subsidiary of P, did not sell the land to an unrelated party until 2013, P should not report any income from the sale of land to S in the 2012 consolidated return.

P and Its Wholly Owned Subsidiary S File a Consolidated