A piece of limestone discovered in sedimentary deposits near Gubbio

Option A : The last word impacting makes the sentence not sound proper...

Looking for split we have 3-2 spilt : that and of ..

as the sentence is stating idea we have to use the that instead of of.. hence c and D is incorrect.

B : Subjunctive mood hence we have used have ....

Sorry, there is no subjunctive mood here. For subjunctive mood to be there, the sentence requires a compulsion, there is no compulsion involved here. This is mere statement. For converting this statement into a subjunctive mood, we may hve to say, though absurdly—

A piece of limestone discovered in sedimentary deposits near Gubbio, Italy, in 1979 demanded/ stipulated/ claimed the first evidence that the extinction of dinosaurs be caused by a meteorite impacting

Coming to other aspects, by meteorite impacting (impacting is gerund here) means a meteorite’s impaction or impact. It is not correct to use an ing gerund where a more befitting straight noun form is available. C is wrong because of the use of being caused as if the impact is happening now. D is a convoluted sentence. E has no completed verb.

Therefore, B survives.

abhi398 had the right idea, but he expressed it in unconventional language so later commenters seemed to have misunderstood his point. I'll clarify.

The original question was, "How could ...extinction may have been caused... be correct, since extinction is singular and have is plural?"

The answer is that the so-called modal verbs used to express past possibility and probability sometimes take different forms than do other verbs. For instance, these are all correct,
He could have answered my text.
He must have decided to ignore it.
He might have fallen down a well.
We always say could/must/might have and we never say could/must/might has, whatever the subject.

Similarly, these sentences are correct, even though they are about counterfactuals rather than about probability or possibility,
He would have answered if he could.
He should have been more careful.

I have heard such sentence moods characterized as subjunctives, perhaps by analogy with a more robust set of subjunctives in other languages, but most people use the word subjunctive in English to mean either hypothetical subjunctive or command subjunctive. I'm not going to go into those here, except to say that you can learn about them in the MGMAT SC guide, that they're not a big deal on the GMAT, and that daagh obviously took abhi398 to mean the command subjunctive.

ERROR ANALYSIS -

1) 'limestone provided the evidence' - action in the past, past tense should exist further
2) Use of 'possibly' - expected

ANSWER CHOICE ANALYSIS -

A) meteorite impacting - wrong
B) CORRECT
C) Use of being is not correct
D) Too wordy
E) Change of voice

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