Consolidated Returns

Compliance With Short-Period Return Rules Can Stave Off Penalties and Rejection of Elections as Untimely

The unextended due date of the return of a domestic corporation, Form 1120, U.S. Corporation Income Tax Return, generally is the 15th day of the third month following the close of the corporation's tax year. However, when a target corporation joins the consolidated group of a purchasing corporation on a date other than the first day of the target corporation's tax year, the due date for the target corporation's short-period final return is determined without regard to the last day of the short period.

Consolidated Income of Affiliated Group Subject to Graduated Rates

The Tax Court held that all the consolidated income of an affiliated group that consisted of a corporation that was a qualified personal service corporation and another corporation that was not a qualified personal service corporation should be taxed using the graduated tax rates of Sec. 11(b)(1).

Unexpected Consequences of Changes in Entity Classifications

When entities change their classification, several income tax issues that are not immediately apparent may come into play. When these issues are discovered, they may require amending tax returns and could result in tax penalties as well.

Opportunity to Eliminate Certain Intercompany Gain

Groups can effectively eliminate the intercompany gain in certain circumstances, thereby reducing the possibility of inadvertently triggering intercompany gain and freeing taxpayers from the need to plan transactions so as to avoid a trigger.

Sidestepping Deferred Intercompany Gain

This item illustrates how transfers of items outside a U.S. consolidated group can trigger a deferred intercompany gain and suggests ways to avoid that result in certain situations.

Final Regs. Simplify Reduced Research Credit Election

The IRS released final regulations (T.D. 9539) that further simplify an election method by which taxpayers may use a standard rate to reduce a research credit under Sec. 41 in lieu of reducing their research expense deductions. The final regulations also clarify how members of a controlled group may make the election. The final regulations adopt with some modification proposed regulations issued in 2009 (REG-130200-08).

Newsletter Articles

SPONSORED REPORT

Year-End Tax Planning and What’s New for 2016

A look at year-end tax planning strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.

PRACTICE MANAGEMENT

CPAs Contend With Tax ID Theft

Tax-related identity theft fraud remains a widespread problem that is often difficult for victims and their tax preparers to correct.