Here's a simple taxation problem that I need help with......thanks for getting me started!
Angela owns all the stock of A, B, and P Corporations. P has owned all the stock of S1 Corporation for six years. The P-S1 affiliated group has filed a consolidated tax return in each of these six years using the calendar year as its tax year. On July 10 of the current year (a non-leap year), Angela sells her entire stock investment in A, which uses the calendar year as its tax year. No change takes place in Angela's ownership of B stock during the tax year. At the close of business on November 25 of this year, S1 purchases 90% of the common stock and 80% of the nonconvertible, nonvoting preferred stock (measured by value) of S2 Corporation. A, P, S1, and S2 are domestic corporations that do not retain any special filing status.
Which corporations are included in the affiliated group? In the controlled group?
What income is included in the various tax returns?
How is the allocation of the income between tax years made if the books are not closed on the sale or acquisition dates?
If no special allocations are made, what portion of the reduced tax rate benefits of Sec. 11 (b) can be claimed in the current year by the affiliated group? In future years?
A partial list of resources includes:
IRC Sec 1504
IRC Sec. 1563
Reg. Sec. 1.1502-76
Temp. Reg. Sec. 1.165-2T
1. Which corporations are included in the affiliated group? In the controlled group?
Group P-S1 is the only affiliated group because according to IRC sec. 1504, an affiliated group is a controlled group that can file a consolidated income tax return. (www.cbiz.com). An S-corporation is excluded as being a member of the control group, according to IRC sec. 1504, and S1 purchase of S2 stocks does not qualify S2 as a member of the affiliated group because it did not meet the 80% voting and value test (www.law.cornell.edu) The controlled group is A, B, and P, according to IRC sec 1563(a)-2,which states that a brother-sister control group consist of two or more corporations if 5 or fewer persons who are individuals, estate or trust owned 50% of the voting stock of all classes of stock entitled to vote or 50% of ...
The expert examines the taxation for Angela who owns all the stock of A, B and P Corporations.