Identify which of the following statements is true.
A)The basic accounting method elections that are used by the seller in intercompany transactions do not override the intercompany transaction rules.
B)P and S are members of an affiliated group that has filed consolidated tax returns for a number of years. The sale of inventory by P, which was acquired from S in an intercompany transaction, outside the affiliated group triggers the restoration of gain by S.
C)Last year, P, S, and T Corporations have filed consolidated tax returns for a number of years. Last year P Corporation sold land (a Sec. 1231 asset)to T at a $75,000 profit. The gain was deferred by P in last year's consolidated tax return. P sold the T stock to Mike on June 1 of this year. The stock sale will require P to report in its income the gain that was deferred on the land sale.
D)All of the above are true.

Question

Quizplus · Accepted Answer

Each statement accurately reflects principles related to intercompany transactions and consolidated tax returns. A) outlines that basic accounting methods do not supersede intercompany transaction rules. B) describes a scenario where intercompany sales outside the group trigger gain restoration. C) explains how the sale of a company within the group can lead to the recognition of previously deferred gains.

Identify Which of the Following Statements Is True