4.5 - Consolidated Tax Returns Flashcards
Who can file a consolidated tax return?
By affiliated corporations who file a consent on form 1122
Who is denied the privilege of filing a consolidated tax return?
S corporations, foreign corporations, most real estate investment trusts, some insurance companies, and exempt organizations
An affiliated group means that a common parent directly owns:
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
Corporations in which an individual (not a corporation) owns 80% or more of the stock of two or more corporations:
Brother-sister corporation
Cannot file consolidated returns
What are some advantages to filing a consolidated return?
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
Consolidated tax returns are filed using what form?
Form 1120
What accounting method and tax year must members of the consolidated tax group use?
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
Who is jointly and severally liable for the entire consolidated tax liability, tax penalties, and interest?
Each member of the consolidated group