M6 Consolidated Tax Return

Question 1

Affiliated group means that a common parent directly owns (2)

Answer 1

80% ore more of voting power of all outstanding stock
AND
80% or more of the value of all outstanding stock of each corporation

Question 2

Are brother-sister corps considered consolidated?

Answer 2

NO

Question 3

Advantages of Filing a Consolidated Return:

1) ____ can offset ___ of another corp
2) ___ can offset ___ of another corp
3) ____ are 100% eliminated in consolidation

Answer 3

1) CAPITAL LOSSES offset CAPITAL GAINS
2) OPERATING LOSSES offset OPERATING PROFITS
3) Dividends received (because they are considered intercompany)

Question 4

Consolidated Taxable Income calculation (5 Steps)

Answer 4

1) Calculate stand-alone taxable income of each member of the group
2) Remove effects of transactions between members - INTERCOMPANY
3) Gains, losses, and deductions required to be determined at the consolidated level are removed from each member’s taxable income (capital gains/losses, section 1231 gains/losses, NOLs, charitable, DRD, Sec 199)
4) Combine each member’s resulting taxable income from the previous steps
5) Adjust combined for items are are required to be determined at the consolidated level (see items in step 3)