P, S and T join in filing a consolidated return that has a 12/31 year end. After
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Question:
P, S and T join in filing a consolidated return that has a 12/31 year end. After Year 2, under Treas. Reg. Section 1.1502-21, there is a $600 NOL allocated to T. On 6/30/Year 3, P sells all of the outstanding stock of T to an unrelated third party. Under the end of the day rule, T ceases in being a member of the consolidated group on 6/30/Year 3. On the Year 3 consolidated return (year ending 12/31), the consolidated group generates $400 of taxable income (before accounting for utilization of NOLs). What amount of NOL can T carry to its first separate return year?
1. $0
2. $200
3. $300
4. $600
5. $400
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