ParentCo purchased all of SubCo's stock on January 1,2008,and the companies have filed consolidated returns since 2008.Taxable income computations for the members include the following.Neither group member incurred any capital gain or loss transactions during these years,nor did they make any charitable contributions.
The 2009 net operating loss:

A)may be carried back to offset SubCo's 2007 taxable income.
B)may be carried forward only and applied against group income if so elected by ParentCo.
C)cannot be carried back against 2007 SubCo income, as consolidated returns were not filed.
D)either a or b, but not both.

Question

ParentCo purchased all of SubCo's stock on January 1,2008,and the companies have filed consolidated returns since 2008.Taxable income computations for the members include the following.Neither group member incurred any capital gain or loss transactions during these years,nor did they make any charitable contributions.
The 2009 net operating loss:

A)may be carried back to offset SubCo's 2007 taxable income. 
B)may be carried forward only and applied against group income if so elected by ParentCo. 
C)cannot be carried back against 2007 SubCo income, as consolidated returns were not filed. 
D)either a or b, but not both.

Quizplus · Accepted Answer

The $11,000 (not $20,000)2009 net operating loss may be carried back against SubCo's 2007 taxable income,as SubCo is solely responsible for generating the loss.Alternatively,ParentCo could elect to forgo the carryback of the 2009 consolidated loss,thus preserving the loss deduction for the group's subsequent years.

ParentCo Purchased All of SubCo's Stock on January 1,2008,and the Companies