R4. Consolidated tax return

Question 1

Consolidated tax return

Answer 1

Affiliated group:

• 80% or more of the voting power of all outstanding stock AND
• 80% ore more of the value of all outstanding stock of each corporation
  (vs. GAAP over 50%)

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Initial Requirements
- each member of the group must file a consent

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If A individual owns 100% B and C - brother/sister

IF A copr owns 100% of B and C . B and C owns 60% and 40% of D. Consolidate all, A is the common parent.

Question 2

Consolidated taxable income calculation

Answer 2

step 1: calculate the stand-alone tax retrun

Step 2: Remove the effects of transactions between members
( intercompany sales, dividends received)

Step 3: gain/loss and deductions that are required to be determined at the consolidated level are removed

( capital gain/loss, section 1231 gain/loss, no, charitable contribution deduction, dividend received deduction)

Step 4: combined taxable income

Step 5: taxable income adjusted for the items that are required to be determined ( form step 3)

Question 3

tax accounting method and periods

Liability

Answer 3

• continue to use the same accounting methods
• consolidated tax group must use the parent’s tax year

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Liability :
jointly and separately liable