P has three wholly-owned subsidiaries S1, S2 and S3. All the four companies are incorporated in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
P has three wholly-owned subsidiaries S1, S2 and S3. All the four companies are incorporated in Australia. P holds directly all the shares in S1 and S2. Shares in S3 are held through S4, another wholly-owned subsidiary of P incorporated in Bermuda. In this income year, P has a taxable income of $2 million. S1 has a tax loss of $10 million, in addition to its brought forward losses of $80 million. S2 has a taxable income of $60 million. S3 has a taxable income of $10 million. S4 has no income or loss. The group seeks your advice on its eligibility to consolidate for income tax purposes and the tax implications of such an election. Advise the group of the income tax implications with respect to consolidation, including: (a) (b) (c) (d) Is this corporate group eligible to consolidate? If so, will you recommend the group to consolidate and why? If the election to consolidate is made, what are the tax implications for the group, including the cost bases of assets in the group and the accumulated losses in S1? What will be the tax consequences if P sells all shares in S1 a year later for $20 million? P has three wholly-owned subsidiaries S1, S2 and S3. All the four companies are incorporated in Australia. P holds directly all the shares in S1 and S2. Shares in S3 are held through S4, another wholly-owned subsidiary of P incorporated in Bermuda. In this income year, P has a taxable income of $2 million. S1 has a tax loss of $10 million, in addition to its brought forward losses of $80 million. S2 has a taxable income of $60 million. S3 has a taxable income of $10 million. S4 has no income or loss. The group seeks your advice on its eligibility to consolidate for income tax purposes and the tax implications of such an election. Advise the group of the income tax implications with respect to consolidation, including: (a) (b) (c) (d) Is this corporate group eligible to consolidate? If so, will you recommend the group to consolidate and why? If the election to consolidate is made, what are the tax implications for the group, including the cost bases of assets in the group and the accumulated losses in S1? What will be the tax consequences if P sells all shares in S1 a year later for $20 million?
Expert Answer:
Answer rating: 100% (QA)
a Eligibility to consolidate To be eligible for tax consolidation a corporate group must satisfy certain criteria The group must have at least one who... View the full answer
Related Book For
Accounting for Decision Making and Control
ISBN: 978-1259564550
9th edition
Authors: Jerold Zimmerman
Posted Date:
Students also viewed these accounting questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
A Case Study of Financial Reporting Issues Qing L. Burke Tim V. Eaton Miami University Alibaba Group Initial Public Offering: A Case Study of Financial Reporting Issues ABSTRACT: In September 2014,...
-
A 0.1 cm thick flat copper plate, 2.5 m x 2.5 m square is to be cooled in a vertical position. The initial temperature of the plate is 90?C with the ambient fluid at 30?C. The fluid medium is either...
-
Write about Technology Issue like security, privacy and information
-
If $1000 is invested for x years at 8%, compounded quarterly, the future value is given by S = 1000(1.02) 4x What amount will result in 8 years?
-
The following information is available to reconcile Clark Companys book balance of cash with its bank statement cash balance as of July 31, 2005: a. After all posting is complete on July 31, the...
-
Myrtle Coast Corporation has a $35,000 operating loss during the current year. Not included in the loss is a $40,000 dividend it received from a corporation in which it owns a 15% interest. Identify...
-
Use the ALEKS calculator to evaluate each expression. Give your answers in radians. Round them to the nearest hundredth. If applicable, click on "Undefined." cos(1.22)= | sin(0.97)= | tan (-0.8)= |...
-
Prepare a purchases return (journal) book from the following transactions for April 2017. 2017 April 05 10 17 28 Returned goods to M/s Kartik Traders Goods returned to Sahil Pvt. Ltd. Goods returned...
-
Sandy Bank, Incorporated, makes one model of wooden canoe. Partial information is given below.Required:Complete the following table.Suppose Sandy Bank sells its canoes for $570 each. Calculate the 0...
-
Mainbrace Ltd is a book publisher and retailer which trades via the Internet. The company was formed using a kit bought from a legal stationer, start up capital was provided by the major shareholder,...
-
What other services do accountants provide in addition to auditing?
-
What are the rules on publishing accounts in abridged form?
-
What specific reports do directors have to ensure are included in the accounts under the UK Corporate Governance Code?
-
What are the time limits for laying and delivery of accounts?
-
Complete the table below by replacing the bracketed text with your responses. An example has been provided in the first row. Ideology / Purpose Sentencing Effects Structure Retribution Mandatory...
-
The text defined intrinsic value as the value of an asset given a hypothetically complete understanding of the assets investment characteristics. Discuss why hypothetically is included in the...
-
Durnstein Schnapps produces three types of schnapps from locally grown Austrian pears, plums, and cherries. Schnapps is a clear, colorless beverage distilled from fermented fruit that normally...
-
Milan DiElectrics (MDE), an Italian firm founded by Frank and Florence Potestio 25 years ago, produces a unique class of ruggedized capacitors for military, aerospace, and industrial applications....
-
Impact Designs embroiders corporate and sports logos on clothing using state-of-the-art multiple head digital embroidering machines. Impact Designs is considering adding a new machine to enter the...
-
Fribourg Instrument. Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs...
-
Capital budgeting has three phases: (1) identification of potential investments, (2) selection of investments, and (3) postaudit of investments. What is the accountants role in each phase?
-
Describe how internal consistency is achieved when considering inflation in a capital-budgeting model.
Study smarter with the SolutionInn App