4.5 - Consolidated Tax Returns Flashcards

1
Q

Who can file a consolidated tax return?

A

By affiliated corporations who file a consent on form 1122

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2
Q

Who is denied the privilege of filing a consolidated tax return?

A

S corporations, foreign corporations, most real estate investment trusts, some insurance companies, and exempt organizations

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3
Q

An affiliated group means that a common parent directly owns:

A

80% or more of the voting power of all outstanding stock
And
80% or more of the value of all outstanding stock of each corporation

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4
Q

Corporations in which an individual (not a corporation) owns 80% or more of the stock of two or more corporations:

A

Brother-sister corporation
Cannot file consolidated returns

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5
Q

What are some advantages to filing a consolidated return?

A

Capital losses of one corporation offset capital gains of another
Operating losses of one corporation offset operating profits of another
Dividends received are 100% eliminated in consolidation
A corporations NOL carryover may be applied against the income of the consolidated group
Income from certain intercompany sales may be deferred

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6
Q

Consolidated tax returns are filed using what form?

A

Form 1120

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7
Q

What accounting method and tax year must members of the consolidated tax group use?

A

Can continue to use the same accounting methods that were in place prior to filing as a consolidated group and must use the parent’s tax year

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8
Q

Who is jointly and severally liable for the entire consolidated tax liability, tax penalties, and interest?

A

Each member of the consolidated group

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