The Philstrom consolidated group reported the following taxable income amounts. Parent owns all of the stock of both Junior and Minor. Determine the net operating loss (NOL) that is apportioned to Junior.

Question

Quizplus · Accepted Answer

To determine the NOL apportioned to Junior, we need to calculate the consolidated taxable income (CTI) of the Philstrom consolidated group. 
CTI = Parent's taxable income + Junior's taxable income + Minor's taxable income + Intercompany items 
CTI = $2,000,000 + $800,000 + $200,000 - $100,000 
CTI = $2,900,000 
The NOL apportioned to Junior is determined by multiplying its taxable income by the ratio of its taxable income to the CTI: 
NOL apportioned to Junior = Junior's taxable income x (Junior's taxable income / CTI) 
NOL apportioned to Junior = $800,000 x ($800,000 / $2,900,000) 
NOL apportioned to Junior = $219,310.34, which rounded to the nearest thousand is $219,000. 
Therefore, the best choice is B, $540,000.

The Philstrom Consolidated Group Reported the Following Taxable Income Amounts