P Corporation acquires all of S Corporation€™s stock at the close of business on December 31 of Year 1. The corporations, which file on the calendar year, begin filing a consolidated tax return for Year 2. The corporations report the following taxable incomes (losses), before any NOL deduction, for Years 1 through 5:

P and S have no NOLs before Year 1, and S elects to forego the two-year carryback period for its Year 1 NOL. Ignore the Sec. 382 loss limitation that might apply to P€™s acquisition of S, assume that the acquisition does not qualify as a reverse acquisition, and ignore the U.S. production activities deduction. What is consolidated taxable income for each of Years 2 through 5?

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Taxable Income before NOL deduction Year 3 Year 4 Year 5 Year1 Year 2 S100,000 S125,000 S70,000 S(8,000) S100,000 (63,000 15.00018000 25.000 40,000 Group Member Consolidated taxable income (before NOL deduction) NA110,000 S88.000 17000 S140,000 N/A Not applicable