Question

OF WIL YUJTUR. 1. SubCo sells an asset to ParentCo at a realized gain. While ParentCo still holds the asset, SubCo leaves the consolidated group. As a result: a. The gain never is recognized. b. SubCo recognizes the gain on its first tax return after leaving the group. c. The group recognizes the gain under the related party rules. d. The group recognizes the gain under the acceleration rule. 2. Which of the following statements is incorrect regarding the dividends received deduction? a. A corporation must hold stock for more than 90 days in order to qualify for a deduction with respect to dividends on such stock. b. The taxable income limitation does not apply with respect to the 100% deduction available to members of an affiliated group. c. If a stock purchase is financed 75% by debt, the deduction for dividends on such stock is reduced by 75%. d. The taxable income limitation does not apply if the normal deduction (i.e., 50% or 65% of dividends) results in a net operating loss for the corporation. e. None of these.

Answer 1

The answers are as follows,

1. The group recognises the gain under the related party rules. Yes, true. In order to arrive at the basis of calculation of gain the status as on the date of transfer should be considered, no matter what happens on the date of calculation.