Homework Answers
Parent Co's separate taxable income = $100,000
Sub Co's separate taxable income = $75,000
Given that Parent co. owned 100% of Sub Co. and the inter company transactions have been included in the above.
Therefore, the excess income from inter co. transactions have to be removed from the same for calculating consolidated taxable income for the year.
Hence consolidated taxable income for the year = 100,000 + 75,000 + 20,000 - 40,000
= $155,000
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