TAX: Related Corporations

Question 1

Affiliated group=Good, Controlled Group=Bad?

Answer 1

True!

Affiliated groups can elect to file a consolidated group BUT they don’t have to.

Controlled group have negative consequences

Question 2

What are examples of controlled groups? What is the accumulated earnings credit for a controlled group, what is the section 179 deduction for a controlled group?

Answer 2

Parent- Subsidiary
Brother-Sister groups
Insurance companies

A controlled group is entitled to $250,000 accumulated earnings credit

A group also receives only one section 179 groups

Question 3

What is a parent-sub controlled group? What are the tests?

Answer 3

Stock possessing at least 80% of the voting power of all classes of voting stock and at least 80% of the total value of the shares

Question 4

What is a brother-sister controlled group?

Answer 4

Two or more corporations owned by five or fewer persons who have a common ownership of more than 50% of the total combined voting powers of all classes o stock or 50% of the total asset value.

Who posses stock representing at least 80% of the voting power of all classes of stock or at least 80% of the total value of shares

Question 5

what is an affiliated group?

Answer 5

• owns at least 80 percent of the voting power
• AND owns 80% of its value
• The test must be met on EVERY day of the tax year

The difference is AND! Controlled group is OR

Question 6

What is the benefit of an affiliated group?

Answer 6

File a consolidated return