Acct 424 Week 3 Compile - Grade Details 1 Question(TCO6)...

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Grade Details 1. Question: (TCO 6) Which of the following is  not  generally a disadvantage of filing tax returns on a consolidated  basis? Your Answer: Compliance costs  usually are higher. Realized losses from  transactions  between affiliates  cannot be  recognized  immediately. Operating losses of  an affiliate reduce  the tax basis of the  parent’s ownership  interest in the entity.   This increases the  gain on the disposal  of the affiliate. Gains from one  affiliate can be  offset by losses  from another.  This  reduces the tax  liabilities of the  group as a whole. CORRECT All of the above are  disadvantages. Instructor Explanation: This is an advantage of consolidation.   Points Received: 2 of 2 2.
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Question: (TCO 6) Which of the following tax items is  not  likely to be considered when a group of related  corporations is evaluating the election to file on a consolidated basis? Your Answer: Instructor Explanation: All of the items may be computed on a group basis and be used to manage the tax liabilities of the group  as a whole.   Points Received: 0 of 2 3. Question: (TCO 6) How  must  the IRS collect the liability for Federal taxes from among a consolidated group? Your Answer: Instructor Explanation: The IRS is not bound to follow a group’s internal tax-sharing agreement.   Points Received: 0 of 2
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5. Question: (TCO 6) ParentCo acquired all of the stock of SubCo on January 1, 20X1, for $3,000,000.  The parties  immediately elected to file consolidated tax returns.  SubCo generated taxable income of $50,000 for  20X1 and paid a dividend of $75,000 to ParentCo.  In 20X2, SubCo generated an operating loss of  $350,000, and in 20X3 produced taxable income of $65,000.  As of the last day of 20X3, what was  ParentCo’s basis in the stock of SubCo? Your Answer: Instructor Explanation: ParentCo’s initial stock basis was $3,000,000.  Positive adjustments to basis include the $50,000 income  for 20X1 and the $65,000 of income for 20X2.  Negative adjustments to basis include the $75,000  dividend paid to ParentCo in 20X1 and the $350,000 loss in 20x2. Purchase price for SubCo, initial basis $3,000,000  20X1 Income 50,000  20X1 Dividend (75,000) 20X2 Loss (350,000) 20X3 Income     65,000       ParentCo’s Basis in SubCo stock, 12/31/X3 $2,690,000   Points Received:
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0 of 2 6. Question: (TCO 5) Francis exchanges her 20% interest in Beryl Corporation for 10,000 shares of Pyrite Corporation  (value $200,000) and $40,000 cash.  Francis's basis in her Beryl stock is $95,000.  The accumulated  earnings of Beryl is $325,000 and of Pyrite is $225,000 at the time of the reorganization. How does  Francis treat this transaction for tax purposes?
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