Blair and Cannon Corporations Are the Two Members of an Affiliated

question 87

Multiple Choice

Blair and Cannon Corporations are the two members of an affiliated group.No prior net Sec.1231 losses have been reported by any group member.The two corporations report consolidated ordinary income of $100,000 and gains and losses from property transactions as follows: Included in the above totals is $6,000 of long-term capital losses recognized by Cannon on an intercompany transaction.Excluded from the above is a $4,000 Sec.1231 gain originally deferred by Cannon that must be reported by the group in the current year.
Which one of the following statements is incorrect?

• A)The consolidated group must report a net long-term capital gain of $9,000 and a net short-term capital gain of $1,000.
• B)Cannon Corporation's separate return reports a $6,000 net long-term capital gain.
• C)The affiliated group reports a $4,000 net Sec.1231 gain.
• D)None of the above statements are incorrect.

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Definitions:

Yield Curve

A graph of yield to maturity as a function of time to maturity.

Immunization

A strategy in fixed-income portfolio management to shield the portfolio's value from interest rate movements.

Duration

A measure of the sensitivity of the price of a bond or other fixed-income investment to changes in interest rates, often used to assess risk.

Interest-Rate Change

A fluctuation in the cost of borrowing or the return on savings, which can significantly impact financial markets and economic conditions.