Question: Consolidated Tax Return With Intercompany Transactions
PART 1: Greenacre Corp and its subsidiary Blueacre are calendar year corporations that keep their respective books on the accrual basis. The companies have taxable income of $300,000 and $350,000, respectively, for tax year 20x4 (before consolidation adjustments, elimination entries and charitable deductions). The following transactions are included:
1. Land was sold by Greenacre Corp to a third party for $90,000. The land was acquired from Blueacre in 20x2. Blueacre acquired the land in 20x0 for $52,000.
2. Greenacre Corp's taxable income includes a $15,000 dividend Blueacre paid to Greenacre Corp.
3. Greenacre Corp sold inventory to Blueacre in 20x5 for a realized $120,000 profit. The intercompany profit on the unsold inventory is $9,500. Greenacre Corp sold inventory to Blueacre in 20x6 for which deferred profit at the beginning of the year is $8,000. Blueacre sold this inventory to an external party. Greenacre Corp sold additional inventory to Blueacre in 20x6 for a realized $155,000 profit. The intercompany profit on the unsold inventory is $7,000.
4. Greenacre Corp and Blueacre contribute $16,000 and $15,000 to charity, respectively.
Directions: Calculate the consolidated taxable income and consolidated tax liability of Greenacre Corp and Blueacre for 20x6. Then calculate the basis of Greenacre Corp's stock at the end of 20x6, assuming that it was $1,650,000 at the beginning of the year.
Part B: Case study "Corporate Inversions: Stanley Works and the Lure of Tax Havens."
In addition to the questions at the end of the case study, use reliable sources to discuss ethical implications of tax avoidance and tax evasion, as well as the tax accountant's role and obligations in such situations. Explain your answer in 5 pages, Submit your answers as the second part of the portfolio assignment.
Requirements: apa format, include introduction and conclusion, 4 references. Clearly identify the requirements being addressed. Show all calculations within the cells of an Excel spreadsheet. This means that you must use formulas and links so that your thought process can be examined. Make good use of comments to convey your thought process as well. No hard coding of solutions.
Article: Corporate Inversions: Stanley Works and the Lure of Tax Havens (By Mihir A. Desai, James R. Hines, Jr and Mark Veblen)