1. ParentCo and SubCo report the following items of income and deduction for the current year....
1. ParentCo and SubCo report the following items of income and
deduction for the current year.
| ParentCo's | SubCo's Taxable | |
| Item | Taxable Income | Income |
| Income (loss) from operations | $100,000 | ($10,000) |
| § 1231 loss | (5,000) | |
| Capital gain | 15,000 | |
| Charitable contribution | 12,000 |
Compute ParentCo and SubCo's consolidated taxable income or loss.
a.$90,000
b.$81,000
c.$88,000
d.$90,500
2. A Federal consolidated group reported the following taxable
income amounts. Parent owns all of the stock of both Junior and
Minor. Determine the net operating loss (NOL) that is apportioned
to Parent.
| Parent | ($400,000) |
| Junior | ($600,000) |
| Minor | $100,000 |
a.$360,000.
b.$400,000.
c.$900,000. All NOLs of a consolidated group are apportioned to the parent.
d.$500,000.
3. ParentCo and SubCo have filed consolidated returns since both
entities were incorporated in year 1. Taxable income computations
for the members include the following. Neither group member
incurred any capital gain or loss transactions during these years,
nor did they make any charitable contributions.
| ParentCo's | SubCo's Taxable | Consolidated | |
| Year | Taxable Income | Income | Taxable Income |
| Year 1 | $100,000 | $ 35,000 | $135,000 |
| Year 2 | $100,000 | ($ 20,000) | $ 80,000 |
| Year 3 | $100,000 | ($109,000) | ? |
| Year 4 | $100,000 | $190,000 | ? |
The year 3 consolidated loss:
a.Is carried back to year 1 and produces a tax refund.
b.Is carried forward to year 4.
c.Offsets ParentCo's year 1 income.
d.Can be used only to offset SubCo's future income.
Homework Answers
| 1. ParentCo and SubCo report the following items of income and deduction for the current year. | |||
| ParentCo's | SubCo's Taxable | ||
| Item | Taxable Income | Income | |
| Income (loss) from operations | $100,000 | ($10,000) | |
| § 1231 loss | (5,000) | ||
| Capital gain | 15000 | ||
| Charitable contribution | 12000 | ||
| Compute ParentCo and SubCo's consolidated taxable income or loss. | |||
| a.$90,000 | Correct | ||
| b.$81,000 | |||
| c.$88,000 | |||
| d.$90,500 | |||
| Parent Co | SubCo | Consolidated | |
| Income (loss) from operations | $100,000 | ($10,000) | $90,000 |
| § 1231 and Capital Gains and Losses [($5,000) +$15,000] | -5000 | 15000 | 10000 |
| Total Income | $95,000 | $5,000 | $100,000 |
| Charitable Contribution (10% TI limit) | $10,000 | ||
| Consolidated Taxable Income | $90,000 | ||
| 2. A Federal consolidated group reported the following taxable income amounts. Parent owns all of the stock of both Junior and Minor. Determine the net operating loss (NOL) that is apportioned to Parent. | |||
| Parent | ($400,000) | ||
| Junior | ($600,000) | ||
| Minor | $100,000 | ||
| a.$360,000. | Correct | ||
| b.$400,000. | |||
| c.$900,000. All NOLs of a consolidated group are apportioned to the parent. | |||
| d.$500,000. | |||
| NOL apportioned to Parent = Consolidated NOL $900,000 × Parent’s separate NOL $600,000 / Aggregate separate NOLs $1,000,000 | $ 3,600,000.00 | ||
| 3. ParentCo and SubCo have filed consolidated returns since both entities were incorporated in year 1. Taxable income computations for the members include the following. Neither group member incurred any capital gain or loss transactions during these years, nor did they make any charitable contributions. | |||
| ParentCo's | SubCo's Taxable | Consolidated | |
| Year | Taxable Income | Income | Taxable Income |
| Year 1 | $100,000 | $ 35,000 | $135,000 |
| Year 2 | $100,000 | ($20,000) | $80,000 |
| Year 3 | $100,000 | ($109,000) | ? |
| Year 4 | $100,000 | $190,000 | ? |
| The year 3 consolidated loss: | |||
| a.Is carried back to year 1 and produces a tax refund. | Correct | ||
| b.Is carried forward to year 4. | |||
| c.Offsets ParentCo's year 1 income. | |||
| d.Can be used only to offset SubCo's future income. | |||
| The year 4 consolidated loss of $9000 is carried back to offset year 1 income consolidated taxable income $135,000 | |||
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