The Corporate Income Tax

1
The Corporate Income Tax
3
Chapter
2
Controlled Groups of Corporations

• Three types of controlled groups
• Brother-sister
• Parent-subsidiary
• Combined group

3
Parent-Subsidiary Groups

• Common parent and all controlled subsidiaries
• 80 control test IRC 1563(a)(1)
• Constructive stock ownership rules applyIRC
  1563(d)(1) and (e)

4
Combined Control Group

• IRC 1563(a)(3) Group where one corporation is
  the parent of a parent-subsidiary group and the
  member of a brother-sister control group

5
Controlled Groups

• Problem C3-52

6
Consolidated Tax Returns

• IRC 1501 Members of an affiliated group may
  elect to file a consolidated tax return
• Reg. 1.1502-75(a)(2) Once a group files a
  consolidated return it must continue filing
  consolidated returns

7
Affiliated Group

• IRC 1504 U.S. parent corporation directly owns
  stock with 80 of voting power and 80 of the
  value in at least one other U.S. corporation
• All other U.S. corporations in unbroken chains of
  at least 80 stock ownership by one or more
  members are included in the affiliated group

8
Affiliated Group

• Affiliated Group Gamma, Alpha, Beta and Delta

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10
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9
Comparison to Consolidated Financial Statement

• Test for filing consolidated financials is 50 or
  more controlling interest (plus certain variable
  interest entities)
• Foreign as well as domestic corporations included
  in consolidated financial statements but not in
  the consolidated tax return
• Entities that are not corporations are also
  included in the consolidated financial statements
  but not in the consolidated tax return
• Go to Chapter 4