ParentCo and SubCo recorded the following items of income and deduction for the current tax year. $$\begin{array} { l c c }
& \text { ParentCo's } & \text { SubCo's Taxable } \
\text { Item } & \text { Taxable Income } & \text { Income } \
\text { Income (Loss) from Operations } & \$ 100,000 & \$ 20,000 \
\S 1231 \text { Loss } & ( 8,000 ) & \
\text { Capital Gain (Loss) } & ( 10,000 ) & 14,000 \
\text { Charitable Contribution } & 20,000 & 1,000
\end{array}$$ Compute ParentCo and SubCo's taxable income or loss computed on a separate basis. ParentCo SubCo
A)$78,300 $30,600
B)$80,000 $33,000
C)$81,000 $33,000
D)$82,800 $30,600
E)$82,800 $33,000

Question

ParentCo and SubCo recorded the following items of income and deduction for the current tax year. $$\begin{array} { l c c } 
& \text { ParentCo's } & \text { SubCo's Taxable } \
\text { Item } & \text { Taxable Income } & \text { Income } \
\text { Income (Loss) from Operations } & \$ 100,000 & \$ 20,000 \
\S 1231 \text { Loss } & ( 8,000 ) & \
\text { Capital Gain (Loss) } & ( 10,000 ) & 14,000 \
\text { Charitable Contribution } & 20,000 & 1,000
\end{array}$$ Compute ParentCo and SubCo's taxable income or loss computed on a separate basis. ParentCo SubCo
A)$78,300 $30,600
B)$80,000 $33,000
C)$81,000 $33,000
D)$82,800 $30,600
E)$82,800 $33,000

Quizplus · Accepted Answer

ParentCo's taxable income is calculated as $100,000 (income from operations) - $8,000 (§1231 loss) - $10,000 (capital loss) - $20,000 (charitable contribution) = $62,000. However, charitable contributions are limited to 10% of taxable income before the contribution, so the deductible amount is $8,200, resulting in $82,800 taxable income. SubCo's taxable income is $20,000 (income from operations) + $14,000 (capital gain) - $1,000 (charitable contribution) = $33,000.

ParentCo and SubCo Recorded the Following Items of Income and Deduction