ParentCo and SubOne Have Filed Consolidated Returns Since Year 1

question 153

Multiple Choice

ParentCo and SubOne have filed consolidated returns since Year 1. SubTwo was formed in Year 3 through an asset spin-off from ParentCo. SubTwo has joined in the filing of consolidated returns since then. Taxable income computations for the members include the following. None of the group members incurred any capital gain or loss transactions during these years, nor did they make any charitable contributions. $$\begin{array} { c c c c c } & \text { ParentCo's } & \text { SubOne's Taxable } & \text { SubTw o's Taxable } & \text { Consolidated } \\\text { Year } & \text { Taxable Income } & \text { Income } & \text { Income } & \text { Taxable Income } \\\text { Year 2 } & \$ 100,000 & \$ 50,000 & \text { N/A } & \$ 150,000 \\\text { Year 3 } & \$ 30,000 & ( \$ 30,000 ) & \$ 10,000 & \$ 10,000 \\\text { Year 4 } & \$ 50,000 & ( \$ 40,000 ) & \$ 40,000 ) & ? \\\text { Year 5 } & \$ 130,000 & \$ 130,000 & \$ 10,000 & ?\end{array}$$ If ParentCo does not elect to forgo the carryback of the Year 4 net operating loss, how much of that year's consolidated net operating loss is carried back to offset prior years' income?

• A)$80,000
• B)$40,000
• C)$30,000
• D)$0

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Definitions:

Guanine

One of the four main nucleobases found in the nucleic acids DNA and RNA.

Representation

Representation can refer to the act of speaking or acting on someone's behalf or depicting or describing something.

Cytosine

One of the four main bases found in DNA and RNA, which pairs with guanine in the genetic code.

Amino Acids

Organic molecules that serve as the building blocks of proteins, containing both amine and carboxyl functional groups.