Critica b. Express your computations for years 2 and 3 a5 d MILIUUII 43. LO.7,9 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, and SubCo produced a $20,000 operating loss. a. Use the computational worksheet of Exhibit 8.3 to derive the group members separate taxable incomes and the group's consolidated taxable income. 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 Parent's operating income amounted to $90,000. c. Using a 25% combined state and Federal income tax rate and the materials from text Appendix F, 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. CHAPTER 8 Consolida EXHIBIT 8.3 Consolidated Taxable Income Worksheet Post- Adjustment Amounts Separate Taxable Income Adjustments Parent information Subsidiary information Group-basis transactions Intercompany events Consolidated taxable income "Permanent eliminations. Matching rule. **Group-basis transaction. Parent Corporation owns 100% of the stock of Subco. This year Parent's taxable income amounted to $100,000 and SubCo generated a $40,000 taxable loss. There were no transactions between the two corporations, and they incurred no capital or 51231 gains/losses, charitable contributions, dividend income, or other items that are accounted for on a group basis. Accordingly, no adjustments are required, and consolidated taxable income is $60,000. Separate Taxable Income $100,000 (40,000) Post- Adjustment Amounts Adjustments $100,000 (40,000) Parent information SubCo information Group-basis transactions Intercompany events Consolidated taxable income "Permanent eliminations. **Group-basis transaction. $ 60,000 Matching rule. 8-5b Typical Intercompany Transactions General Rules When one member of a consolida member of the group, an inte member of a consolidated group engages in a transaction with another of the group, an intercompany transaction occurs. In control accounting treatment of most such transactions L remain in the member Critica b. Express your computations for years 2 and 3 a5 d MILIUUII 43. LO.7,9 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, and SubCo produced a $20,000 operating loss. a. Use the computational worksheet of Exhibit 8.3 to derive the group members separate taxable incomes and the group's consolidated taxable income. 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 Parent's operating income amounted to $90,000. c. Using a 25% combined state and Federal income tax rate and the materials from text Appendix F, 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. CHAPTER 8 Consolida EXHIBIT 8.3 Consolidated Taxable Income Worksheet Post- Adjustment Amounts Separate Taxable Income Adjustments Parent information Subsidiary information Group-basis transactions Intercompany events Consolidated taxable income "Permanent eliminations. Matching rule. **Group-basis transaction. Parent Corporation owns 100% of the stock of Subco. This year Parent's taxable income amounted to $100,000 and SubCo generated a $40,000 taxable loss. There were no transactions between the two corporations, and they incurred no capital or 51231 gains/losses, charitable contributions, dividend income, or other items that are accounted for on a group basis. Accordingly, no adjustments are required, and consolidated taxable income is $60,000. Separate Taxable Income $100,000 (40,000) Post- Adjustment Amounts Adjustments $100,000 (40,000) Parent information SubCo information Group-basis transactions Intercompany events Consolidated taxable income "Permanent eliminations. **Group-basis transaction. $ 60,000 Matching rule. 8-5b Typical Intercompany Transactions General Rules When one member of a consolida member of the group, an inte member of a consolidated group engages in a transaction with another of the group, an intercompany transaction occurs. In control accounting treatment of most such transactions L remain in the member