ParentCo and SubCo have filed consolidated returns since both entities were incorporated in 2012.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 2014 consolidated loss:
A)must be carried forward,unless an election to forgo carryforward is made by the parent.
B)must be carried back,unless an election to forgo the carryback is made by the parent.
C)can be used only to offset SubCo's future income.
D)cannot be used to offset any of ParentCo's 2012 income.

Question

ParentCo and SubCo have filed consolidated returns since both entities were incorporated in 2012.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 2014 consolidated loss:
A)must be carried forward,unless an election to forgo carryforward is made by the parent. 
B)must be carried back,unless an election to forgo the carryback is made by the parent. 
C)can be used only to offset SubCo's future income. 
D)cannot be used to offset any of ParentCo's 2012 income.

Quizplus · Accepted Answer

Under Section 172(b) of the Internal Revenue Code, a consolidated net operating loss (NOL) may be carried back two years and carried forward 20 years. Therefore, unless the parent company elects to waive the carryback period, the consolidated loss must be carried back to prior years before it can be carried forward.

ParentCo and SubCo Have Filed Consolidated Returns Since Both Entities