In the Current Year, Parent Corporation Provided Advertising Services to Its

question 55

Essay

In the current year, Parent Corporation provided advertising services to its 100%-owned subsidiary, SubCo, under a contract that requires no payments to Parent until next year. Both parties use the accrual method of tax accounting and a calendar tax year. The services that Parent rendered were valued at $250,000. In addition, Parent received $20,000 of interest payments from SubCo., relative to an arm's length note between them.
Including these transactions, Parent's taxable income for the year amounted to $400,000. SubCo reported $200,000 separate taxable income. Derive the group's consolidated taxable income, using the format of Figure 8­2.