Indicate whether each of the following would make good partners for electing to file a consolidated return for Federal income tax purposes.
Explain why or why not.
a. ParentCo would like to file on a consolidated basis with SubOne because the subsidiary will be generating sizable operating losses in the next two tax years.
Starting with the third tax year, though, SubOne will enter a highly profitable period.
b. ParentCo has $2 million in suspended foreign tax credits that will expire in two more tax years. Its wholly owned subsidiary, ShortCo, generates $5 million in foreign-source income every year.
c. This year, ParentCo generated $4 million in taxable income, and its wholly owned subsidiary, Small Corporation, reported a $3 million operating loss. Next year, though, Small is projected to start a four-year period with $20 million total taxable profits.
d. ParentCo is highly profitable and makes a large annual gift in support of the local tax-exempt zoological gardens. SubCo reports sizable operating losses every year.