Which one of the following statements about a controlled group of corporations i

Question

Which one of the following statements about a controlled group of corporations is false? A. Members of a controlled group are entitled to only one accumulated earnings tax credit. B. Any controlled group may elect to file consolidated federal income tax returns. C. All members of a controlled group need not use the parent’s tax year. D. A parent corporation and its 80%-owned subsidiary make up a controlled group. Which one of the following statements about a controlled group of corporations is false? A. Members of a controlled group are entitled to only one accumulated earnings tax credit. B. Any controlled group may elect to file consolidated federal income tax returns. C. All members of a controlled group need not use the parent’s tax year. D. A parent corporation and its 80%-owned subsidiary make up a controlled group.

Explanation / Answer

Solution: Any controlled group may elect to file consolidated federal income tax returns.

Explanation: An affiliated group can file a consolidated tax return only if it elects to do so. To file a consolidated tax return, one corporation must own at least 80% of the stock of another corporation. Moreover for a controlled group of corporation, the controlled group members are treated as one group mainly to know the applicability of the additional 5% and the additional 3% percent tax.

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