ParentCo Purchased All of the Stock of ChildCo on January

question 96

Multiple Choice

ParentCo purchased all of 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. No § 382 limit applies. $$\begin{array} { l c c c } & \text { ParentCo's } & \text { ChildCo's Taxable } & \text { Consolidated } \\\text { Year } & \text { Taxable Income } & \text { Income } & \text { Taxable Income } \\\text { Year 1 } & \$ 100,000 & ( \$ 75,000 ) & \mathrm { N } / \mathrm { A } \\\text { Year 2 } & \$ 100,000 & ( \$ 40,000 ) & \$ 60,000 \\\text { Year 3 } & \$ 100,000 & \$ 10,000 & ? \\\text { Year 4 } & \$ 100,000 & \$ 125,000 & ?\end{array}$$ To what extent can ChildCo's 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

---

Definitions:

Gaucher Disease

A genetic disorder that results in the accumulation of fatty substances in certain organs, particularly the spleen and liver, leading to physical complications and organ damage.

Social Responsibility

The commitment of businesses to contribute to sustainable economic development and to the welfare of their stakeholders and the community at large.

Larger Society

Refers to the broader community or the society at large, beyond smaller communities or groups, encompassing all its complexities and interactions.

Accountable

Being responsible or answerable for something, particularly in terms of the fulfillment of duties, obligations, or the accuracy of information.