ParentCo and SubCo have filed consolidated returns since both entities were incorporated in 2007.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 2009 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 only be used to offset SubCo's future income.
E)cannot be used to offset any of ParentCo's 2007 income.

Question

ParentCo and SubCo have filed consolidated returns since both entities were incorporated in 2007.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 2009 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 only be used to offset SubCo's future income. 
E)cannot be used to offset any of ParentCo's 2007 income.

Quizplus · Accepted Answer

A net operating loss arising in a consolidated return year must first be carried back two years (starting with the earliest year),and thereafter,if not completely absorbed,may be carried forward.However,the parent can elect to forgo any carryback,and thus carry the loss forward.The use of the 2009 loss is not limited to SubCo income amounts,since the companies have filed consolidated returns for all years of their existence.

ParentCo and SubCo Have Filed Consolidated Returns Since Both Entities