Calendar year ParentCo acquired all of the stock of SubCo on January 1, year 1, for $1,000,000. The parties immediately elected to file consolidated income tax returns. SubCo generated taxable income of $250,000 for year 1 and paid a dividend of $100,000 to ParentCo. In year 2, SubCo generated an operating loss of $350,000, and in year 3, it produced taxable income of $750,000. As of the last day of year 3, what was ParentCo's basis in the stock of
SubCo?
A) $1,650,000
B) $1,550,000
C) $1,000,000
D) $0

Question

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The Answer of Calendar year ParentCo acquired all of the stock of SubCo on January 1, year 1, for $1,000,000. The parties immediately elected to file consolidated income tax returns. SubCo generated taxable income of $250,000 for year 1 and paid a dividend of $100,000 to ParentCo. In year 2, SubCo generated an operating loss of $350,000, and in year 3, it produced taxable income of $750,000. As of the last day of year 3, what was ParentCo's basis in the stock of
SubCo?
A) $1,650,000
B) $1,550,000
C) $1,000,000
D) $0

Calendar Year ParentCo Acquired All of the Stock of SubCo