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 is subject to the Sec. 382 limitation. This means that the NOL deduction may be limited based on the ownership changes that took place during the current year. Specifically, an ownership change of more than 50% within a three-year period can limit the amount of NOL that can be deducted each year. As Blue's stock was purchased by Robert Martin in the current year, this could trigger an ownership change and limit the carryover of the NOL for the affiliated group.

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