chapter_8_solutions

chapter_8_solutions - 8-1Chapter 8 Solutions Consolidated...

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Unformatted text preview: 8-1Chapter 8 Solutions Consolidated Tax Returns (2011 edition) updated: March 1, 2011 35. When an affiliated group exists, Federal income tax treatment often changes for the group members. Item If Consolidated Return Is Filed If Separate Returns Are Filed a. b. c. d. The dividend payment is eliminated in computing consolidated taxable income, so no tax. Only one 15% tax bracket is allowed to the affiliatedgroup, so total Federal income tax is $22,250. An allocation method is used to determine the payment of each member. Both corporations are fully liable for the $140,000 income tax liability. An allocation method is used to determine the payment of each member. Only one $250,000 floor is allowed to the affiliatedgroup in computing the accumulated earnings credit. The parties are not allowed two such floors. Giant reports $1 million in income, and then claims a $1 million dividends received deduction. Only one 15% tax bracket is allowed to the controlledgroup, so total Federal income tax is $22,250. Giant is liable only for its $65,000 liability, and PebbleCo for its $75,000. Only one $250,000 floor is allowed to the controlledgroup in computing the accumulated earnings credit. The parties are not allowed two such floors Table 8.1 36. When an affiliated group exists, Federal income tax treatment often changes for the group members. Situation If Consolidated Return is Filed If Separate Returns are Filed a. Giant and PebbleCo both produce taxable profits from manufacturing activities. The 199 DPAD is computed on a group basis and deducted on the consolidated return. The 199 DPAD is computed separately for both Giant and PebbleCo. b. PebbleCo pays Giant an annual royalty for use of the Giant trademarks....
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chapter_8_solutions - 8-1Chapter 8 Solutions Consolidated...

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