ABC Corp. has a wholly owned subsidiary, XYZ Inc. ABC Corp. and XYZ Inc. create QRS LLC under state law, with ABC Corp owning 7 of the 10 ownership units in QRS LLC, and XYZ Inc owns the other 3 units. What is the effect, if any, on ABC Corps taxable income if XYZ Incs has a net operating losses of $400 and QRS LLC has net income of $500? Assume no elections are made, and ABC has no other tax items.

	A.	ABC recognizes $350 of QRS LLCs income, representing 70% of its ownership in QRS LLC. XYZ Inc recognizes $150 of QRS LLCs income, representing 30% of its ownership in QRS LLC, this $150 of gain is offset by the $400 loss, for a net loss of $250 to XYZ Inc. ABC does not recognize this net loss of XYZ Inc. ABCs total income is $350.
	B.	ABC Corp. has net income of $100, because ABC Corp and QRS LLC are divisions of ABC Corp.
	C.	ABC recognizes $350 of QRS LLCs income, representing 70% of its ownership in QRS LLC. XYZ Inc recognizes $150 of QRS LLCs income, representing 30% of its ownership in QRS LLC, this $150 of gain is offset by the $400 loss, for a net loss of $250 to XYZ Inc. This $250 loss is added income to the income of ABC Corp. ABCs total income is $100.
	D.	ABC Corp. has net income of $100, because ABC Corp owns both XYZ Inc. and QRS LLC.