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Santana Corporation and Andrei Corporation file consolidated returns. In January 2017, Santana sold Andrei Land with...

Santana Corporation and Andrei Corporation file consolidated returns. In January 2017, Santana sold Andrei Land with a basis of $100,000 for its fair value of $125,000. Andrei sold the property to an unrelated party in April 2018 for $175,000. What amount of gain should be reported for these transactions in the consolidated returns for 2017 and 2018?

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Answer #1

ANSWER:

For 2017:

There will be no gain as the transaction is between related parties. They are related parties because they file consolidated returns which is in case of parent-subsidiary relationship.

for 2018:

here the transaction is between unrelated parties as explicitly stated. The gain is $75000 ($175000 - $100000).

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