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, and the two companies filed consolidated returns for 2012 and thereafter, it implies that ChildCo's loss for the year 2011 cannot be carried back to its prior tax year. The loss can only be used in the year 2012 and future years as a part of the group's consolidated return. Thus, the group can use ChildCo's 2011 loss of $75,000 in 2012-2014. Hence, the correct option is C) $75,000.

ParentCo Purchased All of the Stock of ChildCo on January