All distributions after January 1, by a corporation , whether or not such corporation was a member of an old group , to an existing Blue Cross or Blue Shield organization as defined in section c 2 out of earnings and profits accumulated before are deemed made out of earnings and profits accumulated in pre-affiliation years. A The determination of whether the corporation was in existence and a member or tentatively treated as a member of a group , for taxable years ending before , is made without regard to the exclusions under section b 1 and 2 of any section organization or life insurance company as the case may be and.
B A section organization is not treated as having a change in tax character solely by reason of the loss of its tax-exempt status due to the enactment of section An election by an old group to continue in existence or to file as a new group that was made or deemed made before September 5, , may be revoked by filing an appropriate return or returns on or before January 3, For purposes of this paragraph d 5 x , appropriate returns include separate returns filed by each member of the group or consolidated returns filed in accordance with a delayed election either under paragraph d 5 iii B or vi B of this section.
The following examples illustrate this paragraph d 5. In these examples , each corporation uses the calendar year as its taxable year. The provisions contained in this Treasury decision are needed to immediately amend the consolidated return regulations in response to changes made by section of the Tax Reform Act of It is therefore found impracticable and contrary to the public interest to issue this Treasury decision with notice and public procedure under section b of title 5 of the United States Code or subject to the effective date limitations of section d of title 5, United States Code.
If a consolidated return is required for the taxable year under the provisions of paragraph a 2 of this section, the tax liability of all members of the group for such year shall be computed on a consolidated basis even though:.
If a consolidated return includes the income of a corporation which was not a member of the group at any time during the consolidated return year , the tax liability of such corporation will be determined upon the basis of a separate return or a consolidated return of another group , if paragraph a 2 or b 3 of this section applies , and the consolidated return will be considered as including only the income of the corporations which were members of the group during that taxable year.
If a consolidated return includes the income of two or more corporations which were not members of the group but which constitute another group , the tax liability of such corporations will be computed in the same manner as if separate returns had been made by such corporations unless the Commissioner upon application approves the making of a consolidated return for the other group or unless under paragraph a 2 of this section a consolidated return is required for the other group.
In any case in which amounts have been assessed and paid upon the basis of a consolidated return and the tax liability of one or more of the corporations included in the consolidated return is to be computed in the manner described in subparagraph 1 of this paragraph, the amounts so paid shall be allocated between the group composed of the corporations properly included in the consolidated return and each of the corporations the tax liability of which is to be computed on a separate basis or on the basis of a consolidated return of another group in such manner as the corporations which were included in the consolidated return may, subject to the approval of the Commissioner, agree upon or in the absence of an agreement upon the method used in allocating the tax liability of the members of the group under the provisions of section a.
If a consolidated return is required for the taxable year under the provisions of paragraph a 2 of this section, the filing of separate returns by the members of the group for such year shall not be considered as the making of a return for the purpose of computing any period of limitation with respect to such consolidated return unless there is attached to each such separate return a statement setting forth:.
The consolidated return shall be made on Form for the group by the common parent corporation. The consolidated return, with Form affiliations schedule attached, shall be filed with the district director with whom the common parent would have filed a separate return.
For taxable years beginning before January 1, , the executed Forms must be attached to the consolidated return for the taxable year. For taxable years beginning after December 31, , the group must attach either executed Forms or unsigned copies of the completed Forms to the consolidated return.
Form is not required for a taxable year if a consolidated return was filed or was required to be filed by the group for the immediately preceding taxable year. Each return or form required to be made or prepared by a corporation must be executed by the person authorized under section to execute returns of separate corporations.
The statement of gross income and deductions and the schedules required by the instructions on the return shall be prepared and filed in columnar form so that the details of the items of gross income , deductions , and credits for each member may be readily audited. Such statements and schedules shall include in columnar form a reconciliation of surplus for each corporation , and a reconciliation of consolidated surplus.
Consolidated balance sheets as of the beginning and close of the taxable year of the group , taken from the books of the members, shall accompany the consolidated return and shall be prepared in a form similar to that required for reconciliation of surplus. Paragraph d 1 of this section applies to taxable years for which the due date of the original return without regard to extensions is on or after September 17, Please help us improve our site! No thank you.
If the Commissioner determines that the member has joined in the making of the consolidated return, such member shall be treated as if it had filed a Form for such year for purposes of paragraph h 2 of this section.
Thus, assume that corporations P and S comprised group PS P being the common parent , that P was merged into corporation T the common parent of a group composed of T and corporation U , and that the shareholders of P immediately before the merger, as a result of owning stock in P, own 90 percent of the fair market value of T's stock immediately after the merger.
The group of which P was the common parent is treated as continuing in existence with T and U being added as members of the group , and T taking the place of P as the common parent.
For purposes of determining under a of this subdivision whether the second corporation becomes or would become a member of the group of which the first corporation is the common parent , and for purposes of determining whether the former stockholders of the second corporation own more than 50 percent of the outstanding stock of the first corporation , there shall be taken into account any acquisitions or redemptions of the stock of either corporation which are pursuant to a plan of acquisition described in a or b of this subdivision.
Example 3: Y Corp. In such a case, Sec. The June 30 year-end group has a due date without extensions for its return of Sept. The accelerated due date in Example 3 is often overlooked, because it is triggered by Sec. Specifically, Regs. This tax year-end is thus used for purposes of due-date determination in Sec. Example 4: A calendar-year consolidated group acquired all of the stock of a calendar-year corporation at the end of the day on March 31, The acquired corporation was liquidated into a group member on May 31, , in a transaction not stepped together with the stock acquisition.
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Investopedia does not include all offers available in the marketplace. Related Terms How Affiliated Groups Work An affiliated group is a parent corporation and one or more subsidiaries that are all treated as one company for federal income tax purposes. Loss Disallowance Rule LDR The loss disallowance rule limits a corporation's ability to claim the losses of a subsidiary business for tax purposes. What is an S Corporation S Subchapter?
Learn about S corps here. What Is an Individual Tax Return? An individual tax return is a government form that reports all income for the previous year and any taxes due on it. Partner Links. Related Articles. Business Essentials Subsidiary vs. Affiliate: What's the Difference? Business Essentials LLC vs. S Corporation: What's the Difference?
Incorporation: Which Should I Choose? Investopedia is part of the Dotdash publishing family. Impact of Intragroup Stock Transfers. Group Contraction From Prior Deconsolidation. General Proscription on Reconsolidation. Exception for Certain Deconsolidations. Group Contraction for Transitory Members. Group Contraction for Anti-Abuse Reasons.
Advantages of Filing Consolidated Returns. Basic Advantages. Offset Privilege. Intercorporate Dividends. Intercorporate Profits. Increase in Basis of Stock of a Subsidiary. Other Significant Advantages. Transfers of Property Among Members of the Group. Obtaining U. Contributions to Profit-Sharing Plans. Estimated Tax Payments. Preservation of Separate Corporation Advantages.
Deferral of Reporting of Intercompany Items of Income. Aggregation of Stock Ownership. Avoidance of Personal Holding Company Classification. Disadvantages of Filing Consolidated Returns.
Unified Loss Rule. Compliance With Consolidated Return Regulations. Other Disadvantages. Permanent Nature of Election. Consistent Accounting Period. Section Gains and Losses. Credits and Deductions Subject to Limitations. Bad Debts. Unrealized Intercompany Losses. Reduction of Basis of Stock of a Subsidiary. Excess Losses. Minority Shareholders. Electing to File Consolidated Returns. Election to File Consolidated Returns. Election Is a Privilege.
Consent — Overview. Affirmative Consent to the Regulations. Deemed Consent to the Regulations — Missing Form Deemed Consent to the Regulations — Additional Infirmities. Relief Under Reg. Continuing Effect of Consolidated Return Election. Election Is Permanent. Election to Terminate Consolidated Return Election. Application for Discontinuance. Blanket Permission to File Separate Returns. Filing a Consolidated Return. Affiliations Schedule. Persons Qualified to Execute Returns and Forms. Erroneous Inclusions and Exclusions of Members.
Filing of Separate Returns. Filing of Consolidated Return. Introduction — Regulatory Iterations. Single Entity as Agent. Agent Identity. Agent Status Period.
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