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

question 30

Essay

Pretax operating incomes of Panitz Corporation and its 80%-owned subsidiary, Salazar Corporation, for the year 2011, 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:

Neuron Fires

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Executive Control System

A cognitive system responsible for regulating, controlling, and managing higher brain functions, such as planning, decision-making, and task switching.

Prefrontal Cortex

The front part of the frontal lobes of the brain, associated with complex behaviors, decision making, and moderating social behaviour.

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