ParentCo acquired all of the stock of SubCo on January 1,2007,for $1,000,000.The parties immediately elected to file consolidated income tax returns.SubCo generated taxable income of $50,000 for 2007 and paid a dividend of $75,000 to ParentCo.In 2008,SubCo generated an operating loss of $350,000,and in 2009 it produced taxable income of $65,000.As of the last day of 2009,what was ParentCo's basis in the stock of SubCo?
A)$1,000,000.
B)$690,000.
C)$340,000.
D)$0.

Question

Quizplus · Accepted Answer

ParentCo's initial stock basis was $1,000,000.Positive adjustments to basis include the $50,000 income for 2007 and the $65,000 of income for 2009.Negative adjustments to basis include the $75,000 dividend paid to ParentCo in 2007 and the $350,000 loss in 2008.
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ParentCo Acquired All of the Stock of SubCo on January