When a subsidiary sells to the parent some business-use property that has appreciated from its $20,000 basis to a
$50,000 fair market value, the subsidiary immediately recognizes $30,000 ordinary income on the consolidated return.

Question

Quizplus · Accepted Answer

The subsidiary does not recognize the $30,000 gain as ordinary income immediately on a consolidated return because intercompany transactions are eliminated in consolidation. The gain would be deferred and not recognized until the property is sold to an outside party.

When a Subsidiary Sells to the Parent Some Business-Use Property