Opinion ID: 7270
Heading Depth: 3
Heading Rank: 2

Heading: Income Tax Write-Offs

Text: 30 Alberto et al. also perceive some inequity in an alleged dispute between DGI and JL over which company could write off some $3.3 million of JL's losses. But by attribution DGI owned eighty percent of JL and quite properly employed consolidated financial statements and consolidated tax returns for itself and its subsidiaries, including JL. We are satisfied that there is nothing improper, much less unfair or unjust, in DGI's inclusion of JL's losses in those consolidated tax returns to offset income from other, profitable corporations owned by DGI. 31 Nevertheless, Alberto et al. complain that, as DGI acquired JL merely as a tax write-off, equity demands that DGI be held liable for JL's debts. We discern nothing inequitable about acquiring a business that has tax losses for the purpose of using such losses to offset the profits of other concerns. As the Tenth Circuit observed in a similar context: 32 The Internal Revenue Code allows a parent corporation to file consolidated income tax returns with its subsidiaries when the parent owns at least eighty percent of the subsidiary. Section 1501 allows a parent corporation to shelter taxable income from a profitable subsidiary by offsetting it against losses from an unprofitable subsidiary. It is a common business practice. 27