B.I.G. Corporation sold a plot of undeveloped land to SubCo this year for $100,000. B.I.G. had acquired the land several years ago for $40,000. The consolidated return also reflects the operating results of the parties: B.I.G. generated $130,000 income from operations (exclusive of the sale of the land), and SubCo produced a $20,000 operating loss.

If required, use the minus sign to indicate a loss.

a.Compute the group members' separate taxable incomes and the group's consolidated taxable income or loss.

Taxable Income/Loss

B.I.G. Co$ 190,000

SubCo$ -20,000

Consolidated$ 110,000

b.Same as part (a), except that five years later SubCo sold the land to Outsider Corporation for $130,000, when its operating income totaled $20,000 (exclusive of the sale of the land) and B.I.G.Co's operating income amounted to $90,000.

Taxable Income/Loss

B.I.G.Co$ 90,000

SubCo $ 50,000

Consolidated $ 200,000

c.Using a 25% combined state and Federal income tax rate compute the benefit to the group of deferring the gain on the sale of the land. The B.I.G. group uses a 4% after-tax internal rate of return for purposes of this analysis. The present value factor at 4% for 5 years is 0.8219.

Round your answers to the nearest dollar.

Present value of the tax on the sale of the land, as deferred for 5 years is $____________. Therefore, the net tax benefit to the group as a result of the deferral would be $____________________.