ParentCo and SubCo Have Filed Consolidated Returns Since Both Entities

question 21

Multiple Choice

ParentCo and SubCo have filed consolidated returns since both entities were incorporated in 2011. 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. The 2013 consolidated loss:

• A) must be carried forward before it can be carried back.
• B) must be carried forward, unless an election to forgo carryforward is made by the parent.
• C) must be carried back, unless an election to forgo the carryback is made by the parent.
• D) can be used only to offset SubCo's future income.
• E) cannot be used to offset any of ParentCo's 2011 income.

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Definitions:

Unrealized Loss

A loss that results from holding onto an asset that has decreased in price, not realized until the asset is sold for a lower price.

Outstanding Voting Shares

The number of shares that are currently held by shareholders that grant them the right to vote on company matters.

Cash Dividend

Cash distributed by a business to its owners from the earnings it has generated.

Net Amount

The remaining balance of a transaction after all deductions, including taxes and discounts, have been applied.