Blue and Gold Corporations are members of the Blue-Gold affiliated group,which filed a consolidated tax return for last year,reporting a $200,000 consolidated NOL.Small taxable income amounts were reported by Blue and Gold in separate tax returns filed in years prior to last year.Early in the current year,100% of Blue's stock is purchased by Robert Martin who contributes additional funds to Blue Corporation sufficient to acquire all of Green Corporation's stock.For the current year,the affiliated group reports the following results (excluding the consolidated NOL deduction): Which of the following statements is correct?

Question

Blue and Gold Corporations are members of the Blue-Gold affiliated group,which filed a consolidated tax return for last year,reporting a $200,000 consolidated NOL.Small taxable income amounts were reported by Blue and Gold in separate tax returns filed in years prior to last year.Early in the current year,100% of Blue's stock is purchased by Robert Martin who contributes additional funds to Blue Corporation sufficient to acquire all of Green Corporation's stock.For the current year,the affiliated group reports the following results (excluding the consolidated NOL deduction):  Which of the following statements is correct?

Quizplus · Accepted Answer

Since Blue and Gold are members of an affiliated group that filed a consolidated tax return, the NOL for the group is also consolidated. The NOL can be carried back for two years and forward for 20 years, subject to certain limitations. In this case, the NOL cannot be carried back because the group had taxable income in prior years. The portion of the NOL that is not used as a carryback can be carried over against the current consolidated taxable income, but it is subject to the Sec. 382 limitation, which limits the use of NOLs after an ownership change such as the one that occurred when Robert Martin acquired 100% of Blue's stock. Therefore, the correct answer is C.

Blue and Gold Corporations Are Members of the Blue-Gold Affiliated