Taxation of Related Corporations

Question 1

How can corporations be related?

Answer 1

-Directly through inter-corporate ownership or indirectly through common shareholders

Question 2

What is an affiliated group?

Answer 2

• Group of corporations where one corporation owns at least 80% of voting power and value of shares of another corporation (must be met every day of tax year)
• Once a parent and subsidiary exist, all corporations can be included in affiliate group if 80% or more held jointly

Question 3

Can affiliated corporations file a consolidated return? What requirements are there?

Answer 3

• Yes
• Election to consolidate must be unanimous and is irrevocable
• Members of group must conform tax year to parents tax year

Question 4

What corporations are not eligible to file a consolidated return?

Answer 4

-Foreign corporations, exempt corporations, S corporations, and insurance companies

Question 5

What are examples of controlled groups?

Answer 5

-Parent subsidiary (focus on corporate ownership) & brother sister (focus on individual ownership)

Question 6

When are parent subsidiary and brother sister controlled group tests applied?

Answer 6

-Last day of tax year