I would like to know the answer to this question:

Part 1

P Corporation owns all the stock of S1 and S2 Corporations. The corporations have filed calendar year, consolidated tax returns for several years. On September 15 of the current year, P sells all of S1's stock to Michelle, an unrelated individual.

Requirement

What effect does P's sale of S1's stock have on the P-S1-S2 group's current year consolidated taxable income?

Question content area bottom

Part 1

S1's taxable income or loss for January 1 through September 15

is included in a tax return separate from P Corporation because of the sale.

must be included in current year consolidated taxable income.

Any deferred income, gain, deduction, or loss from intercompany transactions involving S1

do not need to be accounted for in the current year consolidated taxable income.

may need to be included in current year consolidated taxable income under the acceleration rule.

Part 2

S1's amount of any consolidated net operating loss carryovers, consolidated capital loss carryovers, and consolidated charitable contribution carryovers remaining are

required to be calculated within the current year consolidated taxable income.

to be carried over to the separate tax return S1 files.

P's

gain (but not loss) recognized

gain or loss recognized

on the sale of S1's stock

must be taken into account for

should not be included in the

current year consolidated taxable income.