Blue and Gold Corporations are members of the Blue-Gold affiliated group,which filed a consolidated tax return for last year,reporting a $200,000 consolidated NOL.Small taxable income amounts were reported by Blue and Gold in separate tax returns filed in years prior to last year.Early in the current year,100% of Blue's stock is purchased by Robert Martin who contributes additional funds to Blue Corporation sufficient to acquire all of Green Corporation's stock.For the current year,the affiliated group reports the following results (excluding the consolidated NOL deduction): Which of the following statements is correct?

Question

Blue and Gold Corporations are members of the Blue-Gold affiliated group,which filed a consolidated tax return for last year,reporting a $200,000 consolidated NOL.Small taxable income amounts were reported by Blue and Gold in separate tax returns filed in years prior to last year.Early in the current year,100% of Blue's stock is purchased by Robert Martin who contributes additional funds to Blue Corporation sufficient to acquire all of Green Corporation's stock.For the current year,the affiliated group reports the following results (excluding the consolidated NOL deduction):  Which of the following statements is correct?

Quizplus · Accepted Answer

The portion of last year's NOL that is not used as a carryback can be carried over against the current consolidated taxable income, but it is subject to the Sec. 382 limitation. This means that the amount of NOL that can be used to offset taxable income in the current year is limited to the value of the company at the time of the ownership change, which occurred when Robert Martin acquired all of Blue Corporation's stock. Therefore, while the NOL can be used to offset the current consolidated taxable income, it is subject to limits based on the value of the company at the time of the ownership change.

Blue and Gold Corporations Are Members of the Blue-Gold Affiliated