Mako and Snufco Corporations are affiliated and have filed consolidated returns for the first time in 2019. Mako acquired 100% of Zebco stock on January 1 of 2019, the date of Zebco's formation. Mako, Snufco, and Zebco, report the following taxable incomes for 2018 and 2019. How much of the 2018 Zebco NOL be used to offset CTI in 2019?

Question

Mako and Snufco Corporations are affiliated and have filed consolidated returns for the first time in 2019. Mako acquired 100% of Zebco stock on January 1 of 2019, the date of Zebco's formation. Mako, Snufco, and Zebco, report the following taxable incomes for 2018 and 2019.  How much of the 2018 Zebco NOL be used to offset CTI in 2019?

Quizplus · Accepted Answer

According to the information given, Zebco was formed on January 1, 2019, and therefore did not have any taxable income for 2018. So, the only possible source of a net operating loss (NOL) for Zebco in 2018 would have been from inception until the end of the year, which is $12,000. Since consolidated returns were filed in 2019, this NOL can be used to offset CTI in that year.

Mako and Snufco Corporations Are Affiliated and Have Filed Consolidated