Pretax Operating Incomes of Panitz Corporation and Its 80%-Owned Subsidiary

question 14

Essay

Pretax operating incomes of Panitz Corporation and its 80%-owned subsidiary, Salazar Corporation, for the year 2014, are shown below.
Panitz and Salazar belong to an affiliated group. Salazar pays total dividends of $35,000 for the year. There are no unamortized book value/fair value differentials relating to Panitz's investment in Salazar. During the year, Panitz sold land to Salazar at a total loss of $15,000 which is included in its pretax operating income. Salazar still holds this land at the end of the year. The marginal corporate tax rate for both corporations is 34%.
Required:
1. Determine the separate amounts of income tax expense for Panitz and Salazar as if they had filed separate tax returns.
2. Determine Panitz's net income from Salazar.

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Definitions:

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