ParentCo purchased all of the stock of ChildCo on January 2, 2012, and the two companies filed consolidated returns for 2012 and thereafter. Both entities were incorporated in 2011. 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. No § 382 limit applies. Assuming that no election is made to forgo the carryback, to what extent are ChildCo's 2011 losses used by the group in 2012-2014?

Question

ParentCo purchased all of the stock of ChildCo on January 2, 2012, and the two companies filed consolidated returns for 2012 and thereafter. Both entities were incorporated in 2011. 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. No § 382 limit applies.  Assuming that no election is made to forgo the carryback, to what extent are ChildCo's 2011 losses used by the group in 2012-2014?

Quizplus · Accepted Answer

Since ParentCo purchased all of the stock of ChildCo on January 2, 2012, ChildCo's 2011 losses can only be used by the group in 2012-2014 if an election is made to carryback the losses. Since the question states that no election is made to forgo the carryback, ChildCo's 2011 losses will be carried back to 2011 and used to offset any taxable income in that year. Therefore, the group can't use ChildCo's 2011 losses in 2012-2014, and the answer is D) $0.

ParentCo Purchased All of the Stock of ChildCo on January