ParentCo and SubOne have filed consolidated returns since 2006.SubTwo was formed in 2010 through an asset spin-off from ParentCo.SubTwo has joined in the filing of consolidated returns since then.Taxable income computations for the members include the following.None of the group members incurred any capital gain or loss transactions during these years,nor did they make any charitable contributions.

If ParentCo does not elect to forgo the carryback of the 2010 net operating loss,what portion of the 2010 consolidated net operating loss is carried back to offset prior years' income?
A)$120,000.
B)$90,000.
C)$40,000.
D)$30,000.
E)$0.

Question

ParentCo and SubOne have filed consolidated returns since 2006.SubTwo was formed in 2010 through an asset spin-off from ParentCo.SubTwo has joined in the filing of consolidated returns since then.Taxable income computations for the members include the following.None of the group members incurred any capital gain or loss transactions during these years,nor did they make any charitable contributions.

If ParentCo does not elect to forgo the carryback of the 2010 net operating loss,what portion of the 2010 consolidated net operating loss is carried back to offset prior years' income?

If ParentCo does not elect to forgo the carryback of the 2010 net operating loss,what portion of the 2010 consolidated net operating loss is carried back to offset prior years' income?
A)$120,000. 
B)$90,000. 
C)$40,000. 
D)$30,000. 
E)$0.

Quizplus · Accepted Answer

Since SubTwo joined the consolidated returns in 2010 after its formation, SubTwo's share of the 2010 consolidated net operating loss cannot be carried back since its separate return history is less than the three preceding years. Therefore, only ParentCo's portion of the 2010 consolidated net operating loss can be carried back. ParentCo's 2010 taxable income of $90,000 ($150,000 - $60,000) is the amount of the 2010 NOL eligible for carryback.

ParentCo and SubOne Have Filed Consolidated Returns Since 2006