1. Corporation P owns 90% of Corporations A and B. Corporations A and B each own 40% of Corporation C. Corporation C owns 80% of Corporation D. Corporation D owns 100\% of Corporation E, a tax-exempt organization. Corporation E owns 100% of Corporation F which owns 100% of Corporation G. All of the indicated percentages reflect total voting power and total value owned by the shareholder. (a) To what extent do the above corporations constitute an "affiliated group"? (b) What result in (a), above, if Corporation B sells 10% of its stock in Corporation C? 2. P, Inc. owns all of the only class of S, Inc. stock, and P and S are in a consolidated group. During year 1 , P performs services for S in exchange for $10,000, and P incurs $8,000 of expenses in performing those services. Assume that S must capitalize its $10,000 cost for the services and takes into account $1,000 of cost recovery deductions in each of years 2 through 11 . How will the P-S consolidated group be taxed on this transaction