Vol 2 Add'l Test Bank Ch08

Vol 2 Add'l Test Bank Ch08 - Consolidated Tax Returns 8-1...

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Consolidated Tax Returns 8-1 CHAPTER 8 CONSOLIDATED TAX RETURNS EXAMINATION QUESTIONS 1. Blue, Red, and White Corporations file Federal tax returns on a consolidated basis. The group’s tax return has been under audit. Under a valid tax-sharing agreement, each corporation is liable for one-third of the group’s consolidated tax liability. The parties have agreed that the group’s unpaid liability for the year is $350,000. Because of an incorrect tax return position, $120,000 interest and a $90,000 penalty is attributable to Blue. At present, only Red is solvent and has the cash with which to make such a substantial tax payment. What is the maximum amount for which the IRS could be successful in forcing Red to satisfy the outstanding liabilities of the consolidated group? a. $560,000. b. $350,000. c. $116,667. d. $186,667. e. Some other amount. 2. Finch acquired all of the stock of Gull on January 1, 2007, for $250,000. The parties immediately elected to file consolidated tax returns. Gull generated taxable income of $30,000 for 2007 and paid a dividend of $25,000 to Finch. In 2008, Gull generated an operating loss of $90,000, and in 2009 produced taxable income of $30,000. As of the last day of 2009, what was Finch’s basis in the stock of Gull? a. $310,000. b. $250,000. c. $220,000. d. $195,000. e. Some other amount.
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8-2 2010 Corporation Edition 3. Raven purchased all of the stock of Dove on January 1, 2007, for $200,000. Dove produced a loss for 2007 of $280,000 and paid a dividend of $30,000 to Raven. In 2008, Dove generated a loss of $140,000; in 2009, it recognized net income of $100,000. What is Raven’s capital gain or loss if it sells all of its Dove stock to a nongroup member on January 1, 2010, for $40,000? a. ($110,000). b. $-0-. c. $110,000. d. $190,000. e. Some other amount. 4.
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Vol 2 Add'l Test Bank Ch08 - Consolidated Tax Returns 8-1...

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