The MaMa consolidated group reports the following results for the tax year. Dete

Question

The MaMa consolidated group reports the following results for the tax year. Determine each member’s share of the consolidated tax liability, assuming that the members all have consented to use the relative taxable income tax-sharing method. Dollar amounts are listed in millions, and a 35% marginal income tax rate applies to all of the entities.

  MaMaCo

SisOne

SisTwo

SisThree

Consolidated

Ordinary income

$600

$200

$ 60

($30)

$830

Capital gain/loss

–0–

–0–

20

(5)

15

§1231 gain/loss

130

–0–

(55)

–0–

75

Separate taxable incomes

$730

$200

$ 25

($30), with a $5 capital loss carryover

Consolidated taxable income

$920

Consolidated tax liability

$322

Energy tax credit, from SubOne

(10)

Net tax due

$312

  MaMaCo

SisOne

SisTwo

SisThree

Consolidated

Ordinary income

$600

$200

$ 60

($30)

$830

Capital gain/loss

–0–

–0–

20

(5)

15

§1231 gain/loss

130

–0–

(55)

–0–

75

Separate taxable incomes

$730

$200

$ 25

($30), with a $5 capital loss carryover

Consolidated taxable income

$920

Consolidated tax liability

$322

Energy tax credit, from SubOne

(10)

Net tax due

$312

Explanation / Answer

Consolidated tax liabilities are shared as follows: Separate taxable income Allocation ratio Allocated tax due Mamaco 730 730 / 955 312 * 730 / 955 239 sisone 200 200 / 955 312 * 200 / 955 65 sistwo 25 25 / 955 312 * 25 / 955 8 sisthree 0 955 312.00

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