ParentCo Purchased 100% of SubCo's Stock on January 1, Year

ParentCo purchased 100% of SubCo's stock on January 1, Year 2, and the companies have filed consolidated returns since then. Taxable income computations for the members include the following. Neither group member incurred any capital gain or loss transactions during these years, nor did they make any charitable contributions. $$\begin{array} { l c c c } & \text { ParentCo's } & \text { SubCo's Taxable } & \text { Consolidated } \\\text { Year } & \text { Taxable Income } & \text { Income } & \text { Taxable Income } \\\text { Year } 1 & \$ 100,000 & \$ 70,000 & \text { N/A } \\\text { Year 2 } & \$ 100,000 & ( \$ 70,000 ) & \$ 30,000 \\\text { Year } 3 & \$ 12,000 & \$ 20,000 ) & ? \\\text { Year 4 } & \$ 100,000 & \$ 200,000 & ?\end{array}$$ The Year 3 net operating loss:

A) may be carried back to offset SubCo's Year 1 taxable income.
B) may be carried forward only and applied against group income if so elected by ParentCo.
C) cannot be carried back against Year 1 SubCo income, as consolidated returns were not filed.
D) either a or b, but not both.