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).
Quad $\quad$$\quad$$\quad$$\quad$$\quad$$ 1,000,000
Subsidiary 1$\quad$$\quad$$\quad$ (400,000 )
Subsidiary 2 $\quad$$\quad$$\quad$ 200,000
Subsidiary 3 $\quad$$\quad$$\quad$ 600,000
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

To compute consolidated taxable income, we need to add the net incomes of all four corporations, but only the net incomes of the domestic corporations will be taxable in the U.S. Therefore, the consolidated taxable income is:

$1,000,000 (Quad's net income) - $400,000 (Subsidiary 1's net loss) + $200,000 (Subsidiary 2's net income) = $800,000

Option B is the only choice that matches this calculation.

The Quad Affiliated Group Consists of Quad, a Delaware Corporation \quad

The Quad Affiliated Group Consists of Quad, a Delaware Corporation $\quad$