Affiliated Groups (3of3) EXcluded corporations(continued) Regulated investment companies Real estate investment trusts Domestic international sales corporations(DISC) S corporations 6
6 Affiliated Groups (3 of 3) Excluded corporations (continued) –Regulated investment companies –Real estate investment trusts –Domestic international sales corporations (DISC) –S corporations
Advantages of Consolidating Losses in one member offset gains in another Intragroup dividends are eliminated Combined credit and deduction may avoid carryovers Intragroup gains are deferred Consolidated AMT may reduce the negative effects of AMT adjustments
7 Advantages of Consolidating Losses in one member offset gains in another Intragroup dividends are eliminated Combined credit and deduction may avoid carryovers Intragroup gains are deferred Consolidated AMT may reduce the negative effects of AMT adjustments
Disadvantages of Consolidating Election binding on subsequent years Members must use same tax year Intragroup losses are deferred Intragroup losses may prevent a profitable member from taking credits Additional administrative cost 8
8 Disadvantages of Consolidating Election binding on subsequent years Members must use same tax year Intragroup losses are deferred Intragroup losses may prevent a profitable member from taking credits Additional administrative cost
Consolidated Taxable Income 1. Compute each member's income 2. Adjust each member's income 3. Eliminate certain specified items 4. Combine separate taxable income 5, Adjust combined income for consolidated gains, losses deducts See Table C8-1& Appendix B
9 Consolidated Taxable Income 1. Compute each member’s income 2. Adjust each member’s income 3. Eliminate certain specified items 4. Combine separate taxable income 5, Adjust combined income for consolidated gains, losses & deducts See Table C8-1 & Appendix B