Parent's Basis in the Stock of Child, Its Subsidiary, Is

question 138

Essay

Parent's basis in the stock of Child, its subsidiary, is $1 million at the beginning of the year. Child's share of consolidated taxable income this year is a $1.25 million operating loss. Parent's basis in the Child stock now is zero. Explain.

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Definitions:

Upward-Sloping

Characteristic of a line or curve that rises as it moves from left to right, used to describe certain types of supply curves.

Production Possibilities Curve

A graphical representation showing the maximum quantity of goods that can be produced using limited resources to the fullest extent, at a given technology level.

Maximum Combinations

Maximum combinations represent the highest number of product or service bundles that can be produced or offered given a set of resources and technology.

Linear Equation

A mathematical expression that represents a straight line when plotted on a graph, typically in the form y = mx + b.