ParentCo and SubCo Have Filed Consolidated Returns Since Both Entities

question 104

Multiple Choice

ParentCo and SubCo have filed consolidated returns since 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. $$\begin{array} { l c c c } \text { Year } & \begin{array} { c } \text { ParentCo's } \\\text { Taxable Income }\end{array} & \begin{array} { c } \text { SubCo's Taxable } \\\text { Income }\end{array} & \begin{array} { c } \text { Consolidated } \\\text { Taxable Income }\end{array} \\\text { Year 1 } & \$ 100,000 & \$ 35,000 & \$ 135,000 \\\text { Year 2 } & \$ 100,000 & ( \$ 20,000 ) & \$ 80,000 \\\text { Year 3 } & \$ 100,000 & ( \$ 109,000 ) & ? \\\text { Year 4 } & \$ 100,000 & \$ 190,000 & ?\end{array}$$ The year 3 consolidated loss:

• A) Is carried forward to year 4.
• B) Is carried back to year 1 and produces a tax refund.
• C) Can be used only to offset SubCo's future income.
• D) Offsets ParentCo's year 1 income.

---

Definitions:

Shopping Centre Leases

Contracts that dictate the terms under which a retailer can use space within a shopping center, including duration, rent, and other conditions.

Promotional Activities

Marketing efforts undertaken to increase awareness, interest, and sales of a product or service through various methods such as advertising, sales promotions, and public relations.

Legislation Unconstitutional

A declaration that a law or statute conflicts with the constitution and is therefore invalid and unenforceable.

Hours of Operation

The scheduled times during which a business or service is open to the public.