4.5 - Consolidated Tax Returns

Question 1

Who can file a consolidated tax return?

Answer 1

By affiliated corporations who file a consent on form 1122

Question 2

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

Answer 2

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

Question 3

An affiliated group means that a common parent directly owns:

Answer 3

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

Question 4

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

Answer 4

Brother-sister corporation
Cannot file consolidated returns

Question 5

What are some advantages to filing a consolidated return?

Answer 5

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

Question 6

Consolidated tax returns are filed using what form?

Answer 6

Form 1120

Question 7

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

Answer 7

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

Question 8

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

Answer 8

Each member of the consolidated group