What is a federal consolidated group?
An affiliated group of US ‘includible’ corporations, consisting of a parent and subsidiaries directly or indirectly 80% owned, generally may offset the profits of one affiliate against the losses of another affiliate within the group by electing to file a consolidated federal income tax return.
What is a US consolidated group for tax purposes?
A consolidated tax return is a corporate income tax return of an affiliated group of corporations, who elect to report their combined tax liability on a single return. The purpose of the tax return allows for corporations that run their business through many legal affiliates to be viewed as one single entity.
What is a consolidated affiliated group?
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Affiliated groups are required to file consolidated tax returns. An affiliated group is two or more corporations that are related through common ownership but are treated as one for federal income tax purposes.
Who can file a consolidated tax return?
Only entities organized in the United States and treated as corporations may file a consolidated Federal income tax return. The return is filed by a “common parent” and only those subsidiaries in which the common parent owns 80% or more of the vote AND value.
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Who is the parent corporation of a consolidated group?
A consolidated group’s parent corporation acts as the group’s agent in all federal income tax matters [Treasury Regulations section 1.1502-77 (a)]. In this role, the parent corporation pays the group’s tax liability, receives its tax refunds, and interacts with the IRS on the group’s behalf.
When is a subsidiary removed from a consolidated return?
Thereafter, all corporations that begin to meet the 80% vote and value test must join in the consolidated return. If a subsidiary ceases to meet the 80% vote and value test, it is removed from the group. Adjustments to basis and other tax attributes apply upon a subsidiary joining or leaving a group.
When does consolidated group have no taxable income?
Example. In Year 2, the consolidated group has no taxable income because Subsidiary 1’s current year taxable income of $1,000 is fully offset by Subsidiary 2’s current year loss of $1,000 (Exhibit 2).
How is an affiliated group of a corporation taxed?
