ParentCo Purchased All of the Stock of ChildCo on January

Multiple Choice

ParentCo purchased all of the stock of ChildCo on January 2, Year 2, and the two companies filed consolidated returns for Year 2 and thereafter. 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. No § 382 limit applies. $$\begin{array} { l c c c } & \text { ParentCo's } & \text { ChildCo's Taxable } & \text { Consolidated } \\\text { Year } & \text { Taxable Income } & \text { Income } & \text { Taxable Income } \\\text { Year 1 } & \$ 100,000 & ( \$ 75,000 ) & \mathrm { N } / \mathrm { A } \\\text { Year 2 } & \$ 100,000 & ( \$ 40,000 ) & \$ 60,000 \\\text { Year 3 } & \$ 100,000 & \$ 10,000 & ? \\\text { Year 4 } & \$ 100,000 & \$ 125,000 & ?\end{array}$$ To what extent can ChildCo's Year 1 losses be used by the group in Year 4?

A) $135,000
B) $125,000
C) $75,000
D) $10,000
E) $0