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 $590,000 (9,200) (1,900) Corporation T $(245,000) 6,900 6,800 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.

Answer 1

ra) Taxable income of corporation p Ordinary operating e'ncome - $590,000 capital gain Lloss) - (9,200) Sec-1231 gain (Loss) = (1,900) so, corporation It's Taxable income CNOL) = $540,000 $ = $590,000 - $1,900' = $588,100) Cb) Taxable income of corporation I Doelenary operating income = $(245,000) capital gain (Loss) = $6,900 SeC -5231 gain (loss) = $6,800 so, corporation T's Tadable income (NOL) = -$(245,000) + $6,900 + $6,800 3-$ (245,000) +$ 13,700 = -$ (231, 300) = - $231,300 consolidated taxable income of corporation P&T when they fill consolidated tax return, corporation p's taxable income - $ 590,000 +$[-9,200 - 1,900] = $ 590,000 - $ 11, 100 = $578,900 corporation t's taxable income = - $ 231, 300 Hence, com solidated taxable income (P&T), - [ $548,900 + (- $231,300)] = $347,600