Alpha Corporation owns 100 percent of Beta Company, and Beta owns 80 percent of Gamma, Inc., all of which are domestic corporations.There were no excess allocation values at the date of acquisition of the subsidiaries. Information for the three companies for the year ending December 31, 2018 follows:

AlphaBetaGammaSeparate company net income$300,000$200,000$100,000Gross profit from intra-entity transfers of inventory (included in operating income above). The goods have not yet been sold to outsiders or consumed within the consolidated entity.12,00004,000

Which of the following statements is true?

Multiple Choice

• Alpha, Beta, and Gamma must file separate income tax returns because the ownership of Beta is less than 100%.
• Alpha, Beta, and Gamma may file separate income tax returns or a consolidated income tax return.
• Alpha and Beta must file a consolidated income tax return, but must exclude Gamma from the consolidated return.
• Alpha, Beta, and Gamma must file a consolidated income tax return.
• Alpha, Beta, and Gamma will probably not file a consolidated income tax return.

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