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Becker CPA Review, PassMaster Questions
Lecture: Regulation 3 38. CPA-02114 ARE Nov 94 #47 Page 34 In the filing of a consolidated tax return for a corporation and its wholly owned subsidiaries, intercompany
dividends between the parent and subsidiary corporations are:
d. Not taxable.
Included in taxable income to the extent of 20%.
Included in taxable income to the extent of 80%.
Fully taxable. CPA-02114
Choice "a" is correct. Dividends received from other group members are eliminated from the parent's
taxable income in consolidation; no dividends received deduction is allowed. Since the parent eliminates
the subsidiary dividends in consolidation, they are effectively not taxable.
Choices "b", "c", and "d" are incorrect. The regulations require elimination of intercompany dividends in
consolidation. CPA-02115 Type1 M/C A-D 39. CPA-02115 ARE Nov...
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