LO.3, 5 Indicate whether each of the following would make good partners for electing to file a consolidated return for Federal income tax purposes. Explain why or why not.

a. SubCo cannot claim its full domestic production activities deduction because of the taxable income limitation. ParentCo is highly profitable every tax year.

b. ParentCo would like to file on a consolidated basis with SubOne because the subsidiary will be generating sizable operating losses in the next two tax years. Starting with the third tax year, though, SubOne will enter a highly profitable period.

c. ParentCo has $2 million in suspended foreign tax credits that will expire in two more tax years. Its wholly owned subsidiary, ShortCo, generates $5 million in foreignsource income every year.

d. This year, ParentCo generated $4 million in taxable income, and its wholly owned subsidiary, Small Corporation, reported a $3 million operating loss. Next year, though, Small is projected to start a four-year period with $20 million total taxable profits.

e. ParentCo is highly profitable and makes a large annual gift in support of the local tax-exempt zoological gardens. SubCo reports sizable operating losses every year.