Federal Tax

Computation of Consolidated Tax Liability (Portfolio 756)

  • The Portfolio, Computation of Consolidated Tax Liability, analyzes the problems related to the computation of tax liability by an affiliated group of corporations filing a consolidated return.

Description

Bloomberg Tax Portfolio, Computation of Consolidated Tax Liability, No. 756, analyzes the problems related to the computation of tax liability by an affiliated group of corporations filing a consolidated return.

Consolidated tax liability is computed in four steps. First, the separate taxable income or loss of each member is determined in accordance with the eliminations and adjustments peculiar to consolidated returns (e.g., intercompany transactions, inventory, etc.). Next, items that were excluded from the computation of separate taxable income are computed on a consolidated basis. Then, consolidated taxable income is determined by adding the results obtained in the first two steps.

Finally, the tax is determined on the amount of consolidated income, and reduced by consolidated tax credits.
This Portfolio discusses and analyzes: (1) the computation of separate taxable income; and (2) the computation of consolidated income items, such as capital gain or loss and ยง1231 gain or loss. For a discussion of eligibility to file consolidated returns and the scope of the consolidated return regulations, see 754 T.M., Consolidated Returns โ€” Elections and Filing. For an analysis of the concepts involved in the ownership of subsidiary stock within an affiliated group filing consolidated returns, see 755 T.M., Consolidated Returns โ€” Investment in Subsidiaries. For a discussion of the limitations on a consolidated group’s use of losses, see 757 T.M., Consolidated Returns โ€” Limitations on Losses.

Table of Contents

I. Introduction
II. Liability for Income Tax
III. Alternative Minimum Tax Liability
IV. Liability for Penalty Taxes on Undistributed Income
V. Consolidated Tax Credits

George-White-2016
George White
Adjunct Professor
George Washington University
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