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 consolidated NOL can be carried back two years and forward 20 years. The portion of the NOL that is not used as a carryback can be carried over against the current consolidated taxable income, subject to the Sec. 382 limitation. This limitation restricts the use of NOL carryforwards if there is a greater than 50% change in the ownership of a corporation. Since Blue Corporation underwent a 100% change in ownership early in the current year, the Sec. 382 limitation would apply to its NOL carryforwards. Therefore, choice C is correct.

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