LO.3 Giant Corporation owns all of the stock of PebbleCo, so they constitute a Federal affiliated group and a parent-subsidiary controlled group. By completing the following chart, delineate for Giant’s tax department some of the effects of an election to file Federal consolidated income tax returns.

Situation If the Group Files a Consolidated Return If Separate Income Tax Returns Continue to Be Filed

a. Both Giant and PebbleCo produce taxable profits from manufacturing activities. ___________ ___________

b. PebbleCo pays Giant an annual royalty for use of the Giant trademarks. ___________ ___________

c. Giant uses a calendar tax year, while PebbleCo’s tax year-end is March 31.

___________ ___________

d. Giant claims a credit for its foreign tax payments, while Pebble claims a deduction for them. ___________ ___________