>those widgets would sit on the balance sheet and no loss would be recognized in year 1 and just profit in year 2

Unless of course the company manufacturing the widgets (A) sells them to a wholly owned subsidiary (B) for a loss...then A can take the deduction.

Who would then make an even bigger profit, for no tax savings

you do know that this is a well known tax avoidance strategy right? The profits would be later used to offset the losses carried forward by the parent.

Are you an accountant/CPA or attorney?

Perhaps you could pencil out this well known tax avoidance strategy (unless you are really talking about time value of money, jurisdictional arbitrage, or some dodgy maneuver that wouldn’t stand up to an audit)

I take it you are neither accountant/CPA nor attorney who regularly deals with these tax matters.

In lieu of penciling you a tax treatise, you may Google “wholly owned subsidiary tax strategies“. While there are no shortage of tax benefits, inevitably one of the elementary examples you find towards the top will be segregation of manufacturing and sales entities. Unfortunately you likely will not find much on more nuanced situations for example Wholly owned IC-Discs or LOB for wholly owned foreign entities (in many instances those situations can result in 0% US withholding and tax rates)