In 2001 S, Inc.purchased an investment for $15,000.On January 1, 2012, P Corp.purchased all of the stock of S.At that time, S's was worth $11,000.If P and S sell the investment in 2011 and file a consolidated tax return for 2012, how much is considered to be a built-in loss?

Question

Quizplus · Accepted Answer

When P Corp purchased all the stock of S in 2012, the built-in loss (or unrealized loss) of $4,000 from the investment that S purchased in 2001 became a realized loss for the consolidated group. Therefore, the built-in loss is $4,000.