Question
ParentCo purchased all the stock of ChildCo on January 2, Year 2, and the two companies filed consolidated returns for Year 2 and thereafter. Both
ParentCo purchased all the stock of ChildCo on January 2, Year 2, and the two companies filed consolidated returns for Year 2 and thereafter. Both entities were incorporated in Year 1. 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. Assume no 382 limit applies.
|
| ParentCos | ChildCos Taxable | Consolidated |
| Year | Taxable Income | Income | Taxable Income |
| Year 1 | $100,000 | ($ 75,000) | N/A |
| Year 2 | $100,000 | ($ 40,000) | $60,000 |
| Year 3 | $100,000 | $ 10,000 | ? |
| Year 4 | $100,000 | $125,000 | ? |
To what extent can ChildCos Year 1 losses be used by the group in Year 4?
|
| a. | $135,000 |
|
| b. | $125,000 |
|
| c. | $75,000 |
|
| d. | $10,000 |
|
| e. | $0 |
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ACCA Advanced Audit And Assurance
Authors: Nick Blackwell, Annabel Lefton, Emile Woolf International
1st Edition
1848434715, 978-1848434714
