LO.7 In December 2012, Child Corporation prepays Parent Corporation $750,000 for its 2013 use of a common database system. Child is a wholly owned subsidiary of Parent, with whom Child has filed a consolidated Federal income tax return since Child was spun off from Parent many years ago. While both entities have calendar tax years, Parent uses the accrual method; Child employs the cash method of tax accounting.

Both entities are profitable for the 2012 tax year. What tax consequences are the parties trying to accomplish? Will this plan work? Why or why not?