ParentCo and SubCo had the following items of income and deduction for the current year. $$\begin{array} { l c c }
& \text { ParentCo's } & \text { SubCo's Taxable } \
\text { Item } & \text { Taxable Income } & \text { Income } \
\text { Income (loss) from Operations } & \$ 100,000 & ( \$ 10,000 ) \
\S 1231 \text { Loss } & ( 5,000 ) & \
\text { Capital Gain }&& 15,000\
\text { Charitable Contribution } & 12,000
\end{array}$$ Compute ParentCo and SubCo's consolidated taxable income or loss.
A)$81,000
B)$88,000
C)$90,000
D)$90,500

Question

ParentCo and SubCo had the following items of income and deduction for the current year. $$\begin{array} { l c c } 
& \text { ParentCo's } & \text { SubCo's Taxable } \
\text { Item } & \text { Taxable Income } & \text { Income } \
\text { Income (loss) from Operations }  & \$ 100,000 & ( \$ 10,000 ) \
\S 1231 \text { Loss } & ( 5,000 ) & \
\text { Capital Gain }&& 15,000\
\text { Charitable Contribution } & 12,000 
\end{array}$$ Compute ParentCo and SubCo's consolidated taxable income or loss.
A)$81,000
B)$88,000
C)$90,000
D)$90,500

Quizplus · Accepted Answer

The consolidated taxable income is calculated by combining the taxable income of ParentCo and SubCo, adjusting for any intercompany transactions and consolidated deductions. ParentCo's taxable income is $100,000, and SubCo has a loss of $10,000, resulting in a combined income of $90,000. The §1231 loss of $5,000 is already included in ParentCo's operations, and the capital gain of $15,000 from SubCo offsets its operational loss. The charitable contribution is not deducted from the consolidated income for this calculation.

ParentCo and SubCo Had the Following Items of Income and Deduction