P, S1, and S2 Corporations comprise a consolidated group. The group members use the accrual method of accounting. For each of the following intercompany transactions that occur during the current year, determine the intercompany item and corresponding item.
a. P lends S1 money, and P charges interest at a 10% annual rate. The money and interest remain unpaid at the end of the tax year.
b. S1 sells inventory to P. At year end, P holds the entire inventory purchased from S1.
c. P sells land (Sec. 1231 property) to S2. S2 holds the land (Sec. 1231 property) at year-end.
d. S1 provides engineering services that are capitalized as part of the cost of S2’s new factory building.