Chapter 8 Comprehensive Problem: Consolidated Tax Returns

C: 8-67

P and S Corporations have filed consolidated tax returns for ten years. P and S use the accrual method of accounting, and they use the calendar year as their tax year. P and S report separate return taxable income (before any consolidation adjustments and eliminations, the NOL deduction, the charitable contributions deduction, and the dividends-received deduction) for the current year of $200,000 and $250,000, respectively. These amounts include the following current year transactions and events:

• P sells land to a third party for $80,000. P purchased the land from S two years ago for $70,000. S had purchased the land five years ago for $48,000.
• P's separate taxable income includes a $12,000 dividend S paid to P.
• P sold inventory to S in the previous year for which the deferred profit at the beginning of the current year is $5,000. S sells this inventory outside the consolidated group in the current year. P sells additional inventory to S in the current year, realizing a $100,000 profit. The intercompany profit on this unsold inventory is $8,000.
• The P-S group has a $20,000 consolidated NOL carryover available from the previous year. The NOL is wholly attributable to S.
• P receives $10,000 of dividends from corporations in which it owns less than 1% of the stock.
• P and S contribute cash to charities of $17,000 and $11,000, respectively.
• P lends S $150,000 early in the current year. S repays the loan later in the year. In addition, S pays P $6,000 interest at the time of repayment.
• S earns $1,600 of tax-exempt interest income, which is not included in S's $250,000 separate return taxable income.
• P and S have no qualified production activities income.

Determine the P-S group's consolidated taxable income and consolidated tax liability for the current year. What is P's basis for the S stock at the end of the current year? Assume that P's basis for the S stock was $1.4 million at the beginning of the current year.

please make the formatting similar to the example below (like the columns) to do this homework and show the calculation so i know how and where you got the numbers.

P's S's Consolidated Adjustments & Separate Separate Taxable Income Eliminations Reporting Reporting Gross profit on outside sales $725,000 $500,000 $225,000 Operating expenses (300,000) (200,000) (100,000) Interest from corporate bonds 9,000 9,000 -0- Charitable contributions -0- $23,000 (7,000) (16,000) Consol. taxable income before the charitable contribution and U.S. production activities deductions $434,000 $23,000 $ 302,000 $ 109,000 Consolidated charit. contribdel (23,000) Consol. taxable income before the U.S. production activities deduction $411,000 Consolidated U.S. prod. act. ded. (36,990) Consolidated taxable income $ 374,010