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Parent company does not have to file a consolidated tax return

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A parent company does not have to file a consolidated tax return even if it owns more than 80% of a subsidiary.
Required: a) Why might a parent want to file a consolidated tax return?
b) Why might a parent not want to file a consolidated tax return?

Please answer with sufficient detail and references.

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Solution Summary

A parent company which it has on a file for consolidated tax return is given.

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A parent company may want to file a consolidated tax return even if it owned 80% of the subsidiary company because the parent, or holding company, stands to gain greater benefits from filing it, rather than letting the subsidiary file only its return. One greater benefit is when filing this return, the parent would be able to the determine tax liability to be shared by the subsidiary company. But even if the parent company did file, the subsidiary company retains the right to file its own return.

The parent company could therefore offset any tax liability of its own by the negative taxable bases of one or more of the subsidiary companies. However, they could only do that in the year in which the negative taxable ...

Solution provided by:
  • MEd, Grand Canyon University
  • MBA, University of Phoenix
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