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). $$\begin{array} { l c }
\text { Quad } & \$ 1,000,000 \
\text { Subsidiary 1 } & ( 400,000 ) \
\text { Subsidiary 2 } & 200,000 \
\text { Subsidiary 3 } & 600,000
\end{array}$$ 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

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). $$\begin{array} { l c } 
\text { Quad } & \$ 1,000,000 \
\text { Subsidiary 1 } & ( 400,000 ) \
\text { Subsidiary 2 } & 200,000 \
\text { Subsidiary 3 } & 600,000
\end{array}$$ 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.

Quizplus · Accepted Answer

If Quad elects to file a consolidated U.S. tax return, the net income (loss) of its domestic subsidiaries must be combined and the net income of its foreign subsidiary must be excluded. Therefore, the consolidated taxable income would be:

$1,000,000 + (-$400,000) + $200,000 = $800,000

The Quad Affiliated Group Consists of Quad, a Delaware Corporation