C11-Chp-00-Tst-3-Exm-Sol-2011-Nite

C11-Chp-00-Tst-3-Exm-Sol-2011-Nite - 8. Consolidations

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
67e46cd20797bf103a7a8b4a74a5247c478e6c5a.xls Page 1 of 4 No Ans 1 D 2 E Year - 2007 Parent Local Corp. Consolidated Gross income from operations $300,000 $200,000 Interest income 17,000 MACRS depreciation (22,000) (5,000) Other deductible operating expenses (200,000) (203,000) Separate taxable income $95,000 ($8,000) $87,000 Items not included above Capital loss on sale of IBM stock ($70,000) ($80,000) ($80,000) Consolidated taxable income $7,000 Section 1211 says that (for corporations) losses from sales of capital assets are allowed only to the extent of gains from sales of capital assets. Section 1231 covers the sale of business property that is not a capital asset. Section 1231 says that if Section 1231 gains exceed Section 1231 lossses, then the gains are treated as capital gains and the losses are treated as capital losses Section 1231 says that if Section 1231 gains DO NOT exceed Section 1231 lossses, then such sales are NOT treated as sales of capital assets. What we have here is capital losses of $70,000 with no offsetting capital gains. We have ordinary losses of $80,000, which are not subject to the capital loss limit. 3 B 4 A Boone's net taxable income from its operations $300,000 Dividends received from Hickory Corporation 48,000 Total taxable income $348,000 Cannot file a consolidated tax return because ownership test is not met. 5 D The outstanding stock of Corporations A, B, C and D is owned by the following unrelated individuals: Individuals -------------- Corporations -------------- Lowest A B C D Ownership A 5% 70% 80% 40% 40% B 5% 10% 5% 20% 5% C 20% 10% 5% 20% 5% D 70% 10% 10% 20% 10% 60% Which Corporations are members of a brother-sister controlled group under section 1563(a)(2)? b. c. d. B, C & D e. Other 6 B Corporations A, B, and C each have only one class of stock Assume each of the corporations has taxable income of $50,000. Total $150,000. What is the total tax liability of the three corporations? Corporations Shareholders Corp. A Corp. B Corp. C Mr. Jones 60% 40% Ms. Hill 40% 60% Corp. B 80% 100% 100% 80% Layers $50,000 0.15 $7,500 $22,500 25,000 0.25 $6,250 25,000 0.34 $8,500 50,000 0.39 $19,500 $150,000 $41,750 $50,000 0.15 $7,500 25,000 0.25 $6,250 25,000
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

C11-Chp-00-Tst-3-Exm-Sol-2011-Nite - 8. Consolidations

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online