Calendar Year ParentCo Acquired All of the Stock of SubCo

question 104

Multiple Choice

Calendar year ParentCo acquired all of the stock of SubCo on January 1,2012,for $1,000,000.The parties immediately elected to file consolidated income tax returns.SubCo generated taxable income of $150,000 for 2012 and paid a dividend of $100,000 to ParentCo.In 2013,SubCo generated an operating loss of $350,000,and in 2014 it produced taxable income of $75,000.As of the last day of 2014,what was ParentCo's basis in the stock of SubCo?

• A)$1,000,000.
• B)$875,000.
• C)$775,000.
• D)$0.

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