Flying Gator Corporation and its 100%-owned subsidiary, T Corporation, have filed consolidated tax returns for many years. Both corporations use the hybrid method of accounting and the calendar year as their tax year. During 2017 (which is the current year for this problem), they report the operating results as listed in Table C:8-2. Note the following additional information: Flying Gator and T Corporations are the only members of their controlled group. Flying Gators address is 2101 W. University Ave., Gainesburg, FL 32611. Its employer identification number is 38-2345678. Flying Gator was incorporated on June 11, 2005. Its total assets are $430,000. A $50,000 consolidated NOL carryover from the preceding year is available. The NOL is wholly attributable to Flying Gator. Flying Gator and T use the first-in, first-out (FIFO) inventory method. T began selling inventory to Flying Gator in the preceding year, which resulted in a $40,700 deferred intercompany profit at the end of the preceding year. Flying Gator is deemed to realize this profit in the current year because it uses the FIFO method. During the current year, T sells additional inventory to Flying Gator, realizing a $300,000 profit. At the end of the current year, Flying Gator holds inventory responsible for $45,100 of this profit. Flying Gator receives all its dividends from T. T receives all its dividends from a 60%- owned domestic corporation. All distributions are from E&P. For 2017, the dividends-received deduction percentage is 80% if the shareholder corporation owns at least 20% but less than 80% of the distributing corporations stock. Flying Gator receives all its interest income from T. T pays Flying Gator the interest on March 31 of the current year on a loan that was outstanding from October 1 of the preceding year through March 31 of the current year. Flying Gator and T did not accrue any interest at the end of the preceding year because they use the hybrid method of accounting. T pays $5,000 of its interest expense to a third party. Officers salaries are $80,000 for Flying Gator and $65,000 for T. These amounts are included in salaries and wages in Table C:8-2. Flying Gators capital losses include a $9,000 long-term loss on a sale of land to T in the current year. T holds the land at year-end. The corporations have no nonrecaptured net Sec. 1231 losses from prior tax years. Ignore the U.S. production activities deduction. Estimated tax payments for the current year are $150,000. Use a 34% flat tax rate for 2017, regardless of taxable income. Determine the consolidated groups 2017 tax liability. Prepare the first page of the consolidated groups current year corporate income tax return (Form 1120). Hint: Prepare a spreadsheet similar to the one included in Appendix B to arrive at consolidated taxable income.

Current Year Operating Results for Flying Gator and T Corporations (Problems C:8-65 and C:8-67) Income or Deductions Flying Gator T Total Gross receipts $2,500,000 $1,250,000 $3,750,000 Cost of goods sold (1,500,000) (700,000) (2,200,000) Gross profit $1,000,000 $ 550,000 $1,550,000 Dividends 100,000 50,000 150,000 Interest 15,000 15,000 Sec. 1231 gain 20,000 20,000 Sec. 1245 gain 25,000 25,000 Long-term capital gain (loss) (5,000) 6,000 1,000 Short-term capital gain (loss) (3,000) (3,000) Total income $1,110,000 $ 648,000 $1,758,000 Salaries and wages 175,000 200,000 375,000 Repairs 25,000 40,000 65,000 Bad debts 10,000 5,000 15,000 Taxes 18,000 24,000 42,000 Interest 30,000 20,000 50,000 Charitable contributions 22,000 48,000 70,000 Depreciation (other than that included in cost of goods sold) 85,000 40,000 125,000 Other expenses 160,000 260,000 420,000 Total deductions $ 525,000 $ 637,000 $1,162,000 Separate return taxable income (before the NOL deduction and DRD) $ 585,000 $ 11,000 $ 596,000