Cardinal and Bluebird Corporations Both Use a Calendar Year as Their

question 5

Multiple Choice

Cardinal and Bluebird Corporations both use a calendar year as their tax year. At the close of business on June 30, Cardinal Corporation buys all of Bluebird Corporation's stock. If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year, what portion of Cardinal's income will be included in the consolidated return? (Assume all months have 30 days.)

• A)100%
• B)50%
• C)0%
• D)none of the above

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Definitions:

Wages

Compensation received by employees for services performed. Usually, wages are computed by multiplying an hourly pay rate by the number of hours worked.

Tips

Gratuity given voluntarily by customers in exchange for a service, often subject to specific reporting and taxation rules.

Preparer Tax Identification Number

A unique identification number that all paid tax return preparers must use on U.S. federal tax returns or claims for tax refunds submitted to the IRS.

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, indicating the rate of tax applied to your highest level of income.