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Apple Corporation and Banana Corporation file consolidated returns. In January 2007, Apple sold Banana property with a basis of $120,000 for its fair value of $150,000. Banana sold the property to an unrelated party in April 2008 for $200,000. What amount of gain should be reported for these transactions in the consolidated returns for 2011 and 2012?

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jepessoa

Answer:

The consolidated return for 2007 should report $0 in gains, since transactions between the parent company and a subsidiary don't generate gain.

The consolidated return for 2008 should report $80,000 in gains. since Banana Corporation sold an asset with a basis of $120,000 for $200,000.

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