_____ Regarding the preparation of a consolidated tax return, which of the following statements is false?
A) Intercompany profits on intercompany inventory transfers are deferred until the inventory is sold outside the consolidated group.
B) Intercompany losses on intercompany inventory transfers are deferred until the inventory is sold outside the consolidated group.
C) Intercompany dividends are not taxed.
D) Intercompany dividends are reported as taxable income on the cash basis.
E) For those companies within the consolidated group that do not generate profits, their losses can be offset against the earnings of other members of the consolidated group.

Question

Quizplus · Accepted Answer

Intercompany dividends within a consolidated group are eliminated in the consolidation process and are not reported as taxable income. This is because the consolidated tax return treats the group as a single entity, eliminating transactions within the group to avoid double taxation.

_____ Regarding the Preparation of a Consolidated Tax Return, Which