Company Losses and Consolidation
Applied company-loss and consolidation problems.
Applied Questions
Question 1 — Accounting v tax loss
A company’s financial statements show a $500,000 loss but its tax return shows a $120,000 tax loss. Which figure is relevant to Division 36 and why?
Question 2 — Ownership change
A company with carried-forward losses is sold to a new owner. Identify the first company-loss test.
Question 3 — Similar business
After an ownership change, a retail company closes stores and becomes an online seller of the same product range. Identify the business-continuity questions.
Question 4 — Capital loss
Can a company use a carried-forward net capital loss directly against ordinary trading income? Explain.
Question 5 — Single entity rule
A wholly owned subsidiary joins a tax consolidated group. Explain the broad effect of s 701-1.
Question 6 — Transferred losses
Why should a purchaser not value a target’s accumulated tax losses at face value before consolidation due diligence?