Question

1, what are the requirements for corporations to file a consolidated tax return?

2, what if any benefits are there to filling a consolidated tax return?

3, can a non U.S. corporation join in the filing of a consolidated tax return?

4, how do you determine if a corporation has goodwill for tax purposes?

5 assume corporation records goodwill of $18,000,000 in the current year for an acquisition made on June 30. How much if any of the goodwill is deductible in the current year?

6, would it make a difference to your answer in the previous question if the acquisition was stock of a corporation rather than assets of a business? If so how would your answer change and why?

Please answer these questions as soon as possible. Thank you.

Answer 1

1) A consolidated tax return is a corporate income tax return of an affiliated group, who elect to report their combined tax liability on a single return.

The requirements for filing a consolidated tax return are:

An affiliated group elects to file a consolidated tax return by submitting Form 1120. Each affiliated corporation must consent to the original election on Form 1122. After that point, any new member of the associated group must join in the consolidated tax return.

The consolidated return lists all income and expenses of each affiliated member, and based thereon, after necessary adjustments, a single tax. The election to file consolidated return can be difficult to revoke. Once made, the choice remains binding on all subsequent tax years until the affiliated group terminates. The internal revenue service may grant permission to discontinue the election.

2) Benefits of filing a consolidated tax return are :

I) Profits of one company can be offsetted against losses of the other.

2) Capital gains and losses can be netted out.

3) there is no tax on intercompany distributions.

4) The recognition of income is deffered on intercompany transactions

5) The unused foreign tax credit by one company can be used by the other affiliates within the group

6) The parent company serves as the agent in all tax matters.