Scenario 7 - Tax Laws for Corporations (WEB Corporation)

WEB corporation is a member of an affiliated group of corporations that also includes ME corporation, TOO corporation, and ALSO corporation. WEB owns 80% of both the voting power and fair market value (FMV) of the stock of ME and 85% of TOO. ME corporation also owns 80% of both the voting power and FMV of the stock of ALSO. WEB is exploring submission of a consolidated tax return for calendar year tax year 2022. Does WEB and its affiliated group of corporations qualify to submit a consolidated return for 2022?

a) WEB and its affiliated group qualify since WEB meets both ownership tests.

b) WEB and its affiliated group do not qualify since it does not meet the 90% ownership test.

c) It does not qualify since WEB does not directly own at least 80% of all other corporations

in the group.

d) It does not qualify since WEB does not meet the test of owning at least 90% of at least

one of the other corporations in the group.

If WEB qualifies for submission of a consolidated return, what would be the submissions necessary for WEB and its affiliated group to begin filing a consolidated return in 2022?

a) WEB must attach Forms 1122 and 851 with Form 1120 for 2022.

b) WEB must submit Form 1120 along with a written consent from each affiliated

corporation.

c) WEB must attach Form 1122 to its 2021 corporate return and include Form 851 with each

succeeding year's return.

d) WEB must submit Forms 1122 and 851 to the IRS by the end of calendar 2021.

WEB has considered the advantages and disadvantages of filing a consolidated return instead of separate returns. What would not be one of the advantages of filing a consolidated return?

a) The income of all corporations in the group is combined for purposes of applying the corporate tax rates.

b) The time at which intercompany transfers is taxed cannot be postponed.

c) Excess charitable contributions cannot be deducted against another corporation's

income.

d) Income from dividends paid by one corporation to the other cannot be completely

excluded.