Consolidated Tax
Returns
Avis’s taxable income for the year is $300,000 and Best’s taxable income for
the year is $425,000. For each of the scenarios provided, (a) state if a
control group has been created and, if so, define the controlled and (b) compute
the combined tax liability of the two corporations. Be sure to show your work
in order to get full credit.
Scenarios:
1. Matthew, Kelly, and Tammy each own one-third of the stock of Avis and Best.
2. Matthew, Kelly, and Tammy each own one-third of the stock of Avis and
Matthew and Joshua each own 50 percent of the stock of Best.
3. Avis owns 85 percent of Best’s stock on the last day of the year. Avis and
Best file separate (as opposed to consolidated) tax returns.
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