Your client, Big Corporation, and its wholly owned subsidiary, LittleCo, file a consolidated return for Federal income

Question:

Your client, Big Corporation, and its wholly owned subsidiary, LittleCo, file a consolidated return for Federal income tax purposes. Indicate both the financial accounting and the tax treatment of the following transactions.

a. LittleCo pays a $1 million dividend to Big.

b. LittleCo sells investment land to Big. LittleCo's basis in the land is $200,000. The sale price is $600,000.

c. Six months after purchasing the land from LittleCo, Big sells the investment land to Phillips, an unrelated party, for $750,000.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...