J Files a Separate Return for 2012 with an Operating

question 14

Multiple Choice

J files a separate return for 2012 with an operating loss of $5,000.For 2013, J purchases all of the outstanding stock of D corporation.J has taxable income of $3,000 in 2013 and D has income of $1,000.Under the "lonely parent rule," how much of J Corporation's loss carryover may be used on the consolidated tax return?

• A)$4,000
• B)$3,000
• C)$2,000
• D)$1,000

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Definitions:

Lessor

A lessor is an individual or entity that rents out an asset to a lessee under a lease agreement.

Lessee

A person or entity that leases an asset from another, the lessor, under the terms of a lease agreement, gaining the right to use the asset for a specified period in exchange for regular payments.

Business Expense

Monetary outlays or costs that are necessary for a company to operate and conduct its business activities.