ParentCo and SubCo Have Filed Consolidated Returns Since Both Entities

Multiple Choice

ParentCo and SubCo have filed consolidated returns since both entities were incorporated in Year 1. 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. $$\begin{array} { c c c c } & \text { ParentCo's } & \text { SubCo's Taxable } & \text { Consolidated } \\\text { Year } & \text { Taxable Income } & \text { Income } & \text { Taxable Income } \\\text { Year 1 } & \$ 100,000 & \$ 35,000 & \$ 135,000 \\\text { Year 2 } & \$ 100,000 & ( \$ 20,000 ) & \$ 80,000 \\\text { Year 3 } & \$ 100,000 & ( \$ 109,000 ) & ? \\\text { Year 4 } & \$ 100,000 & \$ 190,000 & ?\end{array}$$ The Year 3 consolidated loss:

A) must be carried forward, unless an election to forgo carryforward is made by the parent.
B) must be carried back, unless an election to forgo the carryback is made by the parent.
C) can be used only to offset SubCo's future income.
D) cannot be used to offset any of ParentCo's Year 1 income.