The Group of Parent Corporation, SubOne, and SubTwo Has Filed

question 89

Essay

The group of Parent Corporation, SubOne, and SubTwo has filed a consolidated return since Year 2. The first two entities were incorporated in Year 1, and SubTwo came into existence in Year 2 through an asset spin-off from Parent. Taxable income computations for the members are shown below. None of the group members incurred any capital gain or loss transactions during any of the following any of the following years, nor did they make any charitable contributions.
Describe the treatment of the group's Year 3 consolidated NOL. Hint: Apply the offspring rule. $\begin{array}{ccccc} & \text { Parent's } & \text { SubOne's } & \text { Sub Two's } & \text { Consolidated } \\& \text { Taxable } & \text { Taxable } & \text { Taxable } & \text { Taxable } \\\text { Year } & \text { Income } & \text { Income } & \text { Income } & \text { Income }\\\hline\text { Year 1 } & \$ 200,000 & \$ 70,000 & - & \$ 270,000 \\\text { Year 2* } & \$ 90,000 & \$ 20,000 & (\$ 40,000) & \$ 70,000 \\\text { Year 3* } & \$ 90,000 & (\$ 80,000) & (\$ 40,000) & ? \\\text { Year 4* } & \$ 90,000 & \$ 100,000 & \$ 210,000 & ?\end{array}$
$\text { * Consolidated return year. }$

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Definitions:

Means-Ends Chain

A conceptual framework that links desired outcomes (ends) with the actions or resources (means) required to achieve them.

Higher-Level Objectives

Goals set at a strategic level that aim to achieve broader organizational visions and long-term success.

Lower-Level Objectives

Specific, measurable goals set at a lower hierarchy within an organization, aimed at supporting higher-level strategic objectives.

Quantify

To measure or express something as a numerical value.