Consolidated Tax Returns

Question 1

When can a consolidated return be filed?

Answer 1

All corporations in the group must be members of an affiliated group at some time during the tax year and each member of the group must file a consent on Form 1122 (the act of filing a consolidated tax return by all the affiliated corporations will satisfy the consent requirement); the election to consolidate must be made no later than the extended due date of the parent corporation’s tax return for the year

Question 2

What defines an affiliated group?

Answer 2

A common parent directly owns 80% or more of the voting power of all outstanding stock and directly owns 80% or more of the value of all outstanding stock of each corporation

Question 3

Who is not allowed to file a consolidated return?

Answer 3

S corporations, foreign corporations, most real estate investment trusts (REITS), some insurance companies, and brother-sister corporations (corporations in which an individual instead of a corporation owns 80% or more of the stock of 2 or more corporations)