Key and Glass Corporations were organized in 2018. They became an affiliated group and filed separate tax returns. In 2019, the corporations begin filing a consolidated tax return. Key and Glass report the following results: Which of the following statements is not correct?

Question

Key and Glass Corporations were organized in 2018. They became an affiliated group and filed separate tax returns. In 2019, the corporations begin filing a consolidated tax return. Key and Glass report the following results:  Which of the following statements is not correct?

Quizplus · Accepted Answer

According to the rules of consolidated tax return, NOLs can only be carried forward or back within the affiliated group and not across tax years before or after affiliation. Therefore, Key's last year NOL cannot offset Glass's last year profits and Key's current year income must first be offset by Glass's current year loss. However, Key's last year NOL can offset Key's current year taxable income, but cannot be used to offset this year's consolidated taxable income as it is not carried over from the last year.

Key and Glass Corporations Were Organized in 2018