The Rage, Spit, and Tear Corporations file Federal income tax returns on a conso

Question

The Rage, Spit, and Tear Corporations file Federal income tax returns on a consolidated basis. The group’s tax return currently is under audit. Under a valid tax-sharing agreement, each corporation is liable for one-third of the group’s consolidated tax liability. The affiliates have agreed with the auditor that the group’s unpaid liability for the year is $90,000. Because of an incorrect tax return position, another $3,000 in interest and an $18,000 penalty is attributable solely to Tear. At present, only Rage is solvent and has the cash with which to make such a tax payment. What is the maximum amount for which the government could be successful in forcing Rage to satisfy the outstanding liabilities of the consolidated group? Explain your answer and show any calculations

Explanation / Answer

Solution:-

maximum amount for which the government could be successful in forcing Rage to satisfy the outstanding liabilities of the consolidated group = 90,000 + 3,000 + 18,000 = $ 111,000.

Each member has joint and several liability for the entire amount of the group’s income taxes, interest,and penalties outstanding.

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