Identify Which of the Following Statements Is True

question 19

Multiple Choice

Identify which of the following statements is true.

• A) Last year, P, S, and T Corporations have filed consolidated tax returns for a number of years. Last year P Corporation sold land (a Sec. 1231 asset) to T at a $75,000 profit. The gain was deferred by P in last year's consolidated tax return. P sold the T stock to Mike on June 1 of this year. The stock sale will require P to report in its income the gain that was deferred on the land sale.
• B) P and S are members of an affiliated group that has filed consolidated tax returns for a number of years. The sale of inventory by P, which was acquired from S in an intercompany transaction, outside the affiliated group triggers the restoration of gain by S.
• C) The basic accounting method elections that are used by the seller in intercompany transactions do not override the intercompany transaction rules.
• D) All of the above are true.

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Definitions:

Raising a Hand

A physical gesture used to indicate a desire to speak, ask a question, or gain attention in a group setting.

Illustrator

A visual artist who specializes in enhancing text or concepts with decorative or explanatory imagery.

Gesture

A movement of part of the body, especially a hand or the head, to express an idea or meaning.

Reference Point

A basis or standard for evaluation, assessment, or comparison; a criterion.