Description
- Imagine that a client is pursuing the acquisition of Corporation A that has a substantial net operating loss. Corporation B is a member of the controlled group and is currently included in the consolidated tax return that also has a net operating loss. Analyze the potential advantages and disadvantages of Corporation B’s acquisition of Corporation A and Corporation A’s subsequent inclusion in Corporation B’s consolidated tax return. Suggest the key tax issues the client should consider in determining the deductibility of the net operating losses.
- Imagine that corporations P, S, and C are members of a parent-subsidiary controlled group filing a consolidated tax return. Corporations A and B are members of a brother-sister controlled group that cannot file a consolidated tax return. Design a strategy geared toward creating an affiliated group which makes Corporations A, B, P, S, and C all eligible to file a consolidated tax return.
Explanation & Answer
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Question 1
When net operating loss for a company if incorporated in the controlled group, it
minimizes the entire tax liability of the organization, as it is subtracted from the total taxable
revenue of the controlled group. It is the tax planning approach many of the companies use
where they acquire or purchase the companies that are in loss in order for the loss to be
incorporated in the controlled group which can reduce the tax burden of the corporation.
In this case the loss fo...
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