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:

Cooperation

A process where individuals or groups work or act together for a common purpose or benefit.

Performance Measures

Metrics and standards used to assess and evaluate the effectiveness, output, or outcomes achieved by an individual, team, or organization.

Specific Goals

Objectives that are clearly defined, measurable, achievable, relevant, and time-bound.

Employee Stock Ownership

A program that gives employees ownership interest in the company through stock ownership.