The Quad affiliated group consists of Quad, a Delaware corporation, and its three wholly-owned subsidiaries. This year, the four corporations report the following net income (loss). $\begin{array}{lr}
\text { Quad } & \$1,000,000 \
\text { Subsidiary 1 } & (400,000) \
\text { Subsidiary } 2 & 200,000 \
\text { Subsidiary 3 } & 600,000
\end{array}$ If Quad elects to file a consolidated U.S. tax return, compute consolidated taxable income assuming that subsidiaries 1 and 2 are domestic corporations and subsidiary 3 is a foreign corporation.

Question

Quizplus · Accepted Answer

Consolidated taxable income is calculated by summing the net incomes of Quad and its domestic subsidiaries, excluding the foreign subsidiary. Thus, $1,000,000 (Quad) - $400,000 (Subsidiary 1) + $200,000 (Subsidiary 2) = $800,000. Subsidiary 3's income is not included because it is a foreign corporation.

The Quad Affiliated Group Consists of Quad, a Delaware Corporation