X and its subsidiary B file a consolidated tax return for 2012.During the year, B distributes $15,000 cash to X.X's basis in its B stock is $9,000, and B has current earning and profits for its first year of $6,000.For 2012, no gain is recognized.How much will go to an excess loss account?

Question

Quizplus · Accepted Answer

Since no gain is recognized on the distribution, and the distribution is presumably a return of capital up to the basis amount, there is no excess loss to account for. The distribution is covered by the combination of B's current earnings and profits ($6,000) and the remaining basis in X's stock ($9,000), totaling $15,000, which matches the distribution amount.

X and Its Subsidiary B File a Consolidated Tax Return