Taxation of Business Entities: Chapter 8 Study Questions

May 26th, 2016
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Chapter 8: Consolidated Tax Returns

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TAXATION OF BUSINESS ENTITIES, CHAPTER 8 QUIZ: CONSOLIDATED GROUPSCORRECT ANSWERS ARE HIGHLIGHTED15. P Corporation owns all the stock of S and T Corporations, and the three corporationselected to file a consolidated tax return for the prior year. What circumstances wouldallow the corporations to file separate tax returns for the current year?A.If P Corporation were to sell more than 20% of S's and T's stock in the previous year, then each corporation could file theirown return for the current year.B.If S and T were to issue stock to another person so that P's ownership decreases to less than 80% in the current year,then each corporation could file their own return for the entire current year.C.If P Corporation sells off all of the stock of S and T Corporation to various buyers in the current year, then eachcorporation could file their own return for the current year.D.None of the above.9. P and S1 Corporations have filed consolidated tax returns for several years. S1 acquiresall of S2 Corporation'sstock at the close of business on June 15 of the current year. Whichof the following current year transactions are intercompany transactions?a. S1 sells machinery (Sec. 1245 property) to S2 on September 1.b. P sells inventory to S1 throughout the year.c. S2 performs services for S1 throughout the year.d. P sells inventory to the S1-S2 Partnership on July 23. S1 and S2 are equal partners in the partnership.A.A and b are considered intercompany transactions a

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