789. CHAPTER 8â??CONSOLIDATED TAX RETURNS Question MC #21 ParentCo purchased 100% of SubCoâ??s stock

789. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #21
ParentCo purchased 100% of SubCo’s stock on January 1, 2011, and the companies
have filed consolidated returns since then. Taxable income computations for the
members include the following. Neither group member incurred any capital gain
or loss transactions during these years, nor did they make any charitable
contributions.

ParentCo’s

SubCo’s
Taxable

Consolidated

Year

Taxable
Income

Income

Taxable
Income

2010

$100,000

$ 70,000

N/A

2011

$100,000

($ 70,000)

$30,000

2012

$ 12,000

($ 20,000)

?

2013

$100,000

$200,000

?

The 2012 net operating loss:

a.
may be carried back to offset SubCo’s 2010 taxable income.
b. may be carried forward only and
applied against group income if so elected by ParentCo.
c. cannot be carried back against 2010
SubCo income, as consolidated returns were not filed.
d. either a or b, but not both.

790. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #22
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.

Parent

($600,000)

Junior

($400,000)

Minor

$100,000

a.
$0. All NOLs of a consolidated group are apportioned to the parent.
b. $300,000.
c. $360,000.
d. $400,000.

791. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #23
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 Minor.

Parent

($600,000)

Junior

($400,000)

Minor

$100,000

a.
$0. Minor did not report an NOL of its own.
b. $0. All NOLs of a consolidated group
are apportioned to the parent.
c. $100,000.
d. $300,000.

792. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #24
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 Parent.

Parent

($600,000)

Junior

($400,000)

Minor

$100,000

a.
$0. The SRLY rules apply.
b. $900,000. All NOLs of a consolidated
group are apportioned to the parent.
c. $600,000.
d. $540,000.

793. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #25
ParentCo, SubOne and SubTwo have filed consolidated returns since 2011. All of
the entities were incorporated in 2010. Taxable income computations for the
members include the following. None of the group members incurred any capital
gain or loss transactions during these years, nor did they make any charitable
contributions.

ParentCo’s

SubOne’s
Taxable

SubTwo’s
Taxable

Consolidated

Year

Taxable
Income

Income

Income

Taxable
Income

2010

$200,000

$ 50,000

$150,000

N/A

2011

$200,000

($ 60,000)

$ 70,000

$210,000

2012

$ 60,000

($ 80,000)

($ 40,000)

?

2013

$200,000

$130,000

$ 10,000

?

How should the 2012 consolidated net operating loss be apportioned among the
group members?

ParentCo SubOne SubTwo

a.
$60,000 $ 0 $ 0
b. $20,000 $20,000 $20,000
c. $ 0 $20,000 $40,000
d. $ 0 $40,000 $20,000

794. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #26
ParentCo and SubOne have filed consolidated returns since 2008. SubTwo was
formed in 2012 through an asset spin-off from ParentCo. SubTwo has joined in
the filing of consolidated returns since then. Taxable income computations for
the members include the following. None of the group members incurred any
capital gain or loss transactions during these years, nor did they make any
charitable contributions.

ParentCo’s

SubOne’s
Taxable

SubTwo’s
Taxable

Consolidated

Year

Taxable
Income

Income

Income

Taxable
Income

2010

$100,000

$ 50,000

N/A

$150,000

2011

$ 30,000

($ 30,000)

$10,000

$ 10,000

2012

$ 50,000

($ 40,000)

($40,000)

?

2013

$130,000

$130,000

$10,000

?

If ParentCo does not elect to forgo the carryback of the 2012 net operating
loss, how much of the 2012 consolidated net operating loss is carried back to
offset prior years’ income?

a.
$80,000.
b. $40,000.
c. $30,000.
d. $0.

795. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #27
Which of the following items is not
computed on a consolidated basis?

a.
Dividends received deduction.
b. § 1231 losses.
c. Charitable contributions.
d. Cost recovery deduction.

796. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #28
Which of the following statements is true with regard to intercompany
transactions?

a.
An intercompany transaction is eliminated from consolidated taxable income.
b. All intercompany gains are
recognized, but losses must be deferred.
c. A cash sale of a business asset by
the purchasing member to an acquirer outside of the group triggers immediate
recognition of the gain or loss.
d. The gain or loss on an intercompany
transaction is deferred for up to ten years, after which it is recognized.

797. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #29
ParentCo purchased all of the stock of ChildCo on January 2, 2011, and the two
companies filed consolidated returns for 2011 and thereafter. Both entities
were incorporated in 2010. Taxable income computations for the members include
the following. Neither group member incurred any capital gain or loss
transactions during these years, nor did they make any charitable
contributions. No § 382 limit applies.

ParentCo’s

ChildCo’s
Taxable

Consolidated

Year

Taxable
Income

Income

Taxable
Income

2010

$100,000

($ 75,000)

N/A

2011

$100,000

($ 40,000)

$60,000

2012

$100,000

$ 10,000

?

2013

$100,000

$125,000

?

To what extent can SubCo’s 2010 losses be used by the group in 2013?

a.
$125,000.
b. $75,000.
c. $10,000.
d. $0.

798. CHAPTER
8—CONSOLIDATED TAX RETURNS Question MC #30
ParentCo purchased all of the stock of ChildCo on January 2, 2011, and the two
companies filed consolidated returns for 2011 and thereafter. Both entities
were incorporated in 2010. Taxable income computations for the members include
the following. Neither group member incurred any capital gain or loss
transactions during these years, nor did they make any charitable
contributions. No § 382 limit applies.

ParentCo’s

ChildCo’s
Taxable

Consolidated

Year

Taxable
Income

Income

Taxable
Income

2010

$10,000

($95,000)

N/A

2011

$10,000

$50,000

?

2012

($25,000)

$40,000

?

2013

$10,000

$60,000

?

Assuming that no election is made to forgo the carryback, to what extent are
ChildCo’s 2010 losses used by the group in 2011-2013?

a.
$95,000.
b. $70,000.
c. $60,000.
d. $50,000.
e. $0.

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