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- Only corporations that are members of an affiliated group have the option of filing a consolidated return. An affiliated group exists when one corporation -- referred to as the parent -- holds stock that satisfies the voting and value requirements in at least one other corporation.
bizfluent.com › what-corporations-are-required-to-file-a-consolidated-tax-returnWhat Corporations Are Required to File a Consolidated Tax Return?
A group which filed (or was required to file) a consolidated return for the immediately preceding taxable year is required to file a consolidated return for the taxable year unless it has an election to discontinue filing consolidated returns under paragraph (c) of this section.
- Beneficiaries of a Domestic Estate Or Trust
(a) Entitled to benefits of convention. If he otherwise...
- Refund of Excess Tax Withheld
The return must be filed on or before June 13, 1959. One...
- Taxable Year of Members of Group
(a) Taxable year of members of group. The consolidated...
- 26 CFR 1.1342-1
Electronic Code of Federal Regulations (e-CFR) Title...
- Beneficiaries of a Domestic Estate Or Trust
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Bloomberg Tax Portfolio, Consolidated Returns — Elections and Filing, No. 754, analyzes the eligibility requirements and the scope of the consolidated return regulations. Generally, affiliated groups may elect to file consolidated returns in lieu of separate returns.
Apr 5, 2018 · The Internal Revenue Service doesn't require corporations to file consolidated tax returns with their subsidiaries, but it does allow them to do so. Before a corporation can file a consolidated return, it must satisfy certain stock ownership and voting requirements.
- What Is A Consolidated Tax Return?
- Understanding A Consolidated Tax Return
- Electing to File A Consolidated Tax Return
- Process of Filing A Consolidated Tax Return
- Advantages and Disadvantages of Filing A Consolidated Tax Return
- Consolidated Tax Returns and Agents
- The Bottom Line
A consolidated tax return is a corporate income tax return of an affiliated group of corporations that elect to report their combined tax liability on a single return. This tax return allows for corporations that run their business through many legal affiliates to be viewed as one single entity. Common items that are consolidated include capital ga...
A consolidated tax return combines the tax liability of all includible corporations in an affiliated group. The companies legally permitted to partake in the consolidated group must be includible companies. An includible company, defined by tax law, is any corporation except for certain insurance companies, foreign corporations, tax-exempt corporat...
Each affiliated corporation must consent to file a consolidated tax return by filing Form 1122 and returning it along with Form 1120, the tax form for U.S. corporations. After that point, any new member of the associated group must join in the consolidated tax return. Single affiliates may leave the consolidated group without the group's status bei...
The parent company files the consolidated tax return and all subsidiaries typically begin to follow the tax year of the parent company. This means that the fiscal year of all entities must be aligned.Note that for financial reporting, this is not required. The reporting dates of the parent and subsidiary entities can be different, provided the diff...
Advantages
An affiliated group electing to file a consolidated tax return may substantially alter its combined overall tax liability. For example, a consolidated return ignores sales between connected corporations and therefore no tax is marked. Deferment of taxable gains or losses become realized with the ultimate sale to an outside third party. The income of one affiliated corporation can be used to offset losses of another. Capital gains and losses can also be netted across affiliates and foreign tax...
Disadvantages
When calculating the accumulated earnings tax, the profit and loss of all affiliates are included, which can be detrimental as only a single minimum credit amount is allowed to be used. Plus, not only is intercompany income deferred but so are losses. Accordingly, the effect of filing a consolidated return on each member, and the affiliated group as a whole, is complicated and should be carefully considered before making the election. The associated group should consider its eligibility, its...
Under IRS regulations, the agent for a consolidated group is the sole entity authorized to handle all matters related to the federal income tax liability for the consolidated return year for each group member. This agent remains the same for that tax year regardless of subsequent changes in the group's structure or membership. All communications an...
Section 1501 of the Internal Revenue Code permits companies to report the taxable income for all of their qualifying subsidiaries and affiliates on a single return. All connected entities can combine their incomes, net operating losses, credits, and other items, barring certain insurance companies, foreign corporations, tax-exempt corporations, reg...
- Julia Kagan
Consolidated Return. Corporations filing a consolidated return must check Item A, box 1a, and attach Form 851, Affiliations Schedule, and other supporting statements to the return. Also, for the first year a subsidiary corporation is being included in a consolidated return, attach Form 1122 to the parent's consolidated return.
Aug 13, 2024 · A partnership may not be included in a consolidated return, even if it is 100% owned by members of an affiliated group, since a partnership is not a corporation. However, a member's earnings that flow through from a partnership are included as part of the consolidated group's taxable income or loss.
Some states require affiliated groups or corporations to file a federal consolidated income tax return. Combined tax returns are filed by companies that are nationwide chains and filed in each state that in which they conduct business.
