When an affiliated group elects to be taxed as a single entity, taxable income is calculated based on

Question

Quizplus · Accepted Answer

When an affiliated group elects to be taxed as a single entity, taxable income is calculated based on consolidated income as determined on the consolidated worksheet. This means that the income of all the entities in the group is combined and adjustments are made for intercompany transactions to arrive at the consolidated income, which is then used to calculate the group's tax liability. Choice (B) is incorrect because each firm's separate income is not used to calculate the group's tax liability when it elects to be taxed as a single entity. Choice (C) is only partially correct because adjustments for intercompany transactions are made, but they are made to arrive at consolidated income, not each firm's separate income. Choice (D) is incorrect because one of the other three options must be correct.

When an Affiliated Group Elects to Be Taxed as a Single