Source: https://www.federalregister.gov/documents/2012/03/28/2012-7533/apportionment-of-tax-items-among-the-members-of-a-controlled-group-of-corporations
Timestamp: 2018-08-14 16:49:14
Document Index: 671521085

Matched Legal Cases: ['art 1', '§\u20091', 'art 1', '§\u20091', '§\u20091', '§\u20091', 'art 1']

Federal Register :: Apportionment of Tax Items Among the Members of a Controlled Group of Corporations
A Rule by the Internal Revenue Service on 03/28/2012
77 FR 18686
2012-7533
Example 1. Formation of a new member of a controlled group—
Example 2. Allocating a tax bracket to the short taxable year of a liquidated member of a controlled group—
Example 3. Liquidation of member after its transfer to another controlled group—
Example 4. Short tax year including a December 31st date.
https://www.federalregister.gov/d/2012-7533 https://www.federalregister.gov/d/2012-7533
In Title 26 of the Code of Federal Regulations, Part 1(§ 1.1551 to End of Part 1), revised as of April 1, 2011, on page 24, in § 1.1561-2, paragraphs (c) through (f) are added to read as follows:
Special rules for allocating reductions of certain section 1561(a) tax-benefit items.
(ii) The term short taxable year does not refer to any portion of a tax year of a corporation for which its income is required to be included in a consolidated return pursuant to § 1.1502-76(b).
(i) Facts. On January 2, 2007, corporation X transfers cash to newly formed corporation Y (which begins business on that date) and receives all of the stock of Y in return. X also owns all of the stock of corporation Z on each day of 2006 and 2007. X, Y and Z have an apportionment plan in effect, apportioning the 15 percent taxbracket amount as follows: 40% ($20,000) to each of X and Y and 20% ($10,000) to Z. X, Y and Z each file a separate return with respect to the group's December 31st, 2007 testing date. X is on a calendar tax year and Z is on a fiscal tax year ending on March 31. Y adopts a fiscal year ending on June 30 and timely files a tax return for its short taxable year beginning on January 2, 2007, and ending on June 30, 2007.
(ii) Y's short taxable year. On June 30, 2007, Y is a component member of a parentsubsidiary controlled group of corporations composed of X, Y and Z. Pursuant to paragraph (e)(1) of this section, the group may not apportion any amount of the 15 percent tax bracket to Y's short taxable year ending on June 30, 2007. Rather, Y is entitled to exactly 1/3 of such bracket amount, or $16,667.
(i) Facts. On January 1, 2007, corporation P owns all of the stock of corporations S1, S2 and S3 (the P group). Each of these four component members of the P group, with respect to the group's December 31st, 2007 testing date, files its separate return on a calendar year basis. These members have an apportionment plan in effect (the P group plan) under which S1 and S2 are each entitled to 40% of the 15 percent tax-bracket amount ($20,000), and P and S3 are each entitled to 10% of the 15 percent tax-bracket amount ($5,000). On May 31, 2007, S1 liquidates and therefore files a return for the short taxable year beginning on January 1, 2007, and ending on May 31, 2007. On July 31, 2007, S2 liquidates and therefore files a return for the short taxable year beginning on January 1, 2007 and ending on July 31, 2007. P and S3 each file a return for their 2007 calendar tax years.
(ii) Apportionment of the 15 percent tax bracket to S1for its short taxable year. On May 31, 2007, S1 is a component member of the P group composed of P, S1, S2 and S3. Pursuant to paragraph (e)(1) of this section, the group may not apportion any amount of the 15 percent tax bracket to S1's short taxable year ending on June 30, 2007. Rather, S1 is entitled to exactly 1/4 of such bracket amount, or $12,500.
(iii) Apportionment of the 15 percent tax bracket to S2for its short taxable year. On July 31, 2007, S2 is a component member of the P group composed of P, S2 and S3. Pursuant to paragraph (e)(1) of this section, the group may not apportion any amount of the 15 percent tax bracket to S2's short taxable year ending on June 30, 2007. Rather, S2 is entitled to exactly 1/4of such bracket amount, or $16,667.
(iv) Apportionment of the 15 percent tax bracket to P and S3for each of their calendar tax years. On December 31st, 2007, P and S3 are component members of the P group. Accordingly, for P and S3's 2007 calendar tax year, they are each apportioned $25,000 of the 15 percent tax bracket, pursuant to the applicable P group plan.
(i) Facts. The facts are the same as in Example 2, except that P, on April 30, 2007, sold all of the stock of S2 to the M-N controlled group. At the time of the sale, M and N are both unrelated to any members of the P group. As in Example 2, S2 liquidates on July 31, 2007, and therefore files a tax return for its short taxable year beginning on January 1, 2007, and ending on July 31, 2007. Pursuant to the sales agreement, the N-M group timely notified P that S2 had liquidated.
Corporation X owns all of the stock of corporations Y and Z. X, Y and Z each file separate returns. X and Y are on a calendar tax year and Z is on a fiscal tax year beginning October 1 and ending September 30. On January 2, 2007, Z liquidates. Because Z's final tax year (beginning on October 1, 2006 and ending on January 2, 2007) includes a December 31st date, that is, December 31, 2006, it is therefore not subject to the short taxable year rule provided by section 1561(b) and paragraph (e) of this section. Accordingly, Z is a component member of the X-Y-Z group, for the group's December 31st, 2006 testing date. Thus, the rules of this paragraph (e) do not limit the amount of any of the tax-benefit items of section 1561(a) available to Z or to this controlled group.
(f) Effective/applicability date. This section applies to any tax year beginning on or after December 21, 2009. However, taxpayers may apply this section to any Federal income tax return filed on or after December 21, 2009. For tax years beginning before December 21, 2009, see § 1.1561-2T as contained in 26 CFR part 1 in effect on April 1, 2009.
[FR Doc. 2012-7533 Filed 3-27-12; 8:45 am]