Comet operates solely within the United States. It owns two subsidiaries conducting business in the United States and several foreign countries. Both subsidiaries are U.S. corporations. This year, the three corporations report the following:

a. If Comet and its two subsidiaries file a consolidated U.S. tax return, compute consolidated income tax.
b. How would the aggregate tax of the group change if the three corporations file separate U.S. tax returns?
c. Identify the reason for the difference in the tax liability in parts a and b above.

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Foreign Source income U.S. Source Foreign Income Tax Paid Comet Sub 1 Sub 2 $600,000 150,000 410,000 -0 $3,500,000 4,700,000 S 380,000 2,350,000