P and S file a federal consolidated tax return. P manufactures kitchen equipment and S is in the restaurant business. In 20Y5, P sells equipment with a cost of $100,000 to S for $150,000. Because the equipment was inventory to P, P did not claim any depreciation. In 20Y5, S uses the equipment in its restaurant business and claims tax depreciation of $30,000, which includes $10,000 of depreciation related to S's step-up in basis. What adjustment(s), if any, are required when computing the P-S group's consolidated taxable income for 20Y5? Defer $50,000 gain and restore $10,000 of the gain Defer $50,000 gain None of these choices is correct Defer $50,000 gain and restore $30,000 of the gain Defer $50,000 gain and restore $20,000 of the gain

Answer rating: 100% (QA)

The correct answer is Defer 50000 gain and restore 20000 of the gain Heres why Intercompany Sale This is a sale between two members of the same consolidated group P and S Deferred Gain Since the sale ... View the full answer