In 2011, P Purchases and Places into Service a Machine

question 12

Multiple Choice

In 2011, P purchases and places into service a machine that qualifies for the business tax credit.In 2012, P sells the machine to its wholly owned subsidiary, S.In 2013, S is separated from the group and files a separate tax return for the year.From these facts, choose the correct response below.

• A)The sale from P to S constitutes a disposition in 2012.
• B)If S sells the machine in 2013, P is responsible for the investment tax credit recapture.
• C)If S sells the machine in 2013, S is responsible for the investment tax credit recapture.
• D)If S sells the machine in 2013, P or S will have to recapture the investment tax credit in accordance with the tax-sharing agreement in effect at the time of the intercompany sale.
• E)None of the responses are correct.

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Definitions:

Certified

Official recognition or guarantee that an individual, organization, product, or document meets certain predefined standards.

Primarily Liable

Refers to the party who has the main responsibility to fulfill an obligation or debt in a legal agreement.

Secondarily Liable

Refers to the responsibility that falls on a party only after the primarily liable party has failed to fulfill their obligations.

Accommodation Maker

An individual who signs a loan document as a guarantor without receiving any of the loan proceeds, promising to pay the debt if the principal borrower fails to do so.