When the net accumulated taxable losses of a subsidiary exceed the parent's acquisition price, the parent's basis in the subsidiary's stock becomes negative.

Question

Quizplus · Accepted Answer

The parent's basis in the subsidiary's stock cannot become negative; instead, it would be reduced to zero, and any losses beyond that point would not be recognized for tax purposes until the subsidiary generates future income or the investment is disposed of.

When the Net Accumulated Taxable Losses of a Subsidiary Exceed