C12-Chp-08-1-Consol-Tax-Acctg-2012

C12-Chp-08-1-Consol-Tax-Acctg-2012 - 1 Chapter 8....

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Unformatted text preview: 1 Chapter 8. Consolidations and related topics C11-Chp-08-1-Consol-Tax-Acctg-2011.PPT Howard Godfrey, Ph.D., CPA Professor of Accounting Copyright Howard Godfrey, 2011. 2 1. Determine whether a group of corporations is a brother-sister group. (Must rely on code and this pp file). 2. Income tax for brother-sister group. (Chap 2, Pg. 21) 3. Determine whether a group of corporations are an affiliated group. (Pg. 8) 4. Determine whether a group of corporations is a parent- subsidiary controlled group. (Pg. 12). 5. Determine whether a group of corps can file a consolidated return. (Pg. 12) 6. Explain the procedures for making an initial consolidated return election. (Pg. 13, 18+) 7. What is the matching rule? (Pg. 29) 8. Advantages of a consolidated tax return. (Pg. 15, 31) 9. How are intercompany dividends handled on a consolidated return?(Pg. 21) 10.What is the amount of the dividend received deduction if a consolidated return is not filed ? (Pg. 31) 3 What is a controlled group? What are tax consequences of being a controlled group? (Sec. 1561, 1563) 4 Sue owns 100% of these corps. Dream Magic Home, Inc. Lawn, Inc. Revenue $800,000 $200,000 Expenses 750,000 170,000 Tax. Income $50,000 $30,000 Type of controlled group? 1563. What is combined tax liability? $12,000 b. $15,000 c. $15,450 Controlled Corporations 5 Dream Total Allocate Rate Tax Layer 1 $50,000 $25,000 15% $3,750 Layer 2 $25,000 $12,500 25% $3,125 Layer 3 $25,000 $12,500 34% $4,250 Total $50,000 $11,125 Magic Layer 1 $50,000 $25,000 15% $3,750 Layer 2 $25,000 $5,000 25% $1,250 Layer 3 $25,000 $0 34% $0 Total $30,000 $5,000 Would you allocate differently? 6 Controlled Groups of Corporations. Special tax rules apply to corps that are under common control to prevent them from being used to avoid taxes that would otherwise be due. A. Why Special Rules Are Needed. Multiple corporations could be used to avoid having corporate income taxed at a 35% rate. The entire group of corporations must share the benefits of the progressive tax rate schedule and pay any surcharge on the combined taxable income of the group. B. What Is a Controlled Group? A controlled group is a group of two or more corporations that are owned directly or indirectly by the same shareholder or group of shareholders. 7 Parent-Subsidiary Controlled Groups. A parent-subsidiary controlled group is a group of two or more corporations where one corporation (the parent) owns directly at least 80% of the voting power of all classes of voting stock, or 80% of the total value of all classes of stock of a second corporation. There can be more than one subsidiary in the group. If the parent and/or a subsidiary own in total 80% of the voting power of all classes of voting stock, or 80% of the total value of all classes of stock of another corporation, that corporation is included in the controlled group. 8 Determine whether a group of corporations is a brother-sister group. 9 Brother-Sister Controlled Groups....
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This note was uploaded on 03/09/2012 for the course ACCT 6120 taught by Professor Godfrey,h during the Spring '08 term at UNC Charlotte.

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C12-Chp-08-1-Consol-Tax-Acctg-2012 - 1 Chapter 8....

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