Question

Corporation Powns 93 percent of the outstanding stock of Corporation T. This year, the corporation's records provide the following information. Ordinary operating income (loss) Capital gain (loss) Section 1231 gain (loss) Corporation P $690,000 (7,200) (1,850) Corporation T $(295,000) 7,900 7,600 a. Compute each corporation's taxable income if each files a separate tax return. b. Compute consolidated taxable income if Corporation P and Corporation T file a consolidated tax return. Complete this question by entering your answers in the tabs below. Required A Required B Compute each corporation's taxable income if each files a separate tax return. (Net loss(es) should be indicated by a minus sign.) Corporation P's Separate Return Corporation T's Separate Return Taxable income (NOL)

Answer 1

A)

B)

Corporation P's Corporation T's Ordinary operating income (loss) $ 690,000 $ ( 295,000) Capital gain Nill $ 7,900 Section 1231 gain (loss) ($ 1850) $7,600 Capital loss deductible to extent of capital and section 1231 gain Nill NILI Taxable income (NOL) $ 688,150 $( 279,500)

Consolidated return Ordinary operating income 395,000 Capital gain 7,900 Net section 1231 gain 5,750 Deductible capital loss (7,200) Taxable income $401,450