ParentCo purchased all of the stock of SubCo on January 2,2009,and the two companies filed consolidated returns for 2009 and thereafter.Both entities were incorporated in 2008.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.

To what extent can SubCo's 2008 losses be used by the group in 2011?

Question

ParentCo purchased all of the stock of SubCo on January 2,2009,and the two companies filed consolidated returns for 2009 and thereafter.Both entities were incorporated in 2008.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.

To what extent can SubCo's 2008 losses be used by the group in 2011?

Quizplus · Accepted Answer

SubCo's 2008 losses can be carried forward and used by the group in future years, subject to certain limitations. According to the IRS rules, the loss limitation rules for consolidated groups state that prior year losses of a subsidiary that was a member of the consolidated return group in a prior year can be used to offset taxable income of other members in the current year, subject to a limit. This limit is generally equal to the subsidiary's separate return limitation year (SRLY) income, multiplied by the highest corporate tax rate in effect for the current year. In this case, SubCo's 2008 losses can be used to offset taxable income of other members in 2011, subject to a limit of $75,000 (which is calculated as SubCo's SRLY income of $100,000 multiplied by the highest corporate tax rate of 75%). Therefore, choice B is the correct answer.

ParentCo Purchased All of the Stock of SubCo on January