Federal Tax

Consolidated Returns — Limitations on Losses (Portfolio 757)

  • This Portfolio analyzes the problems relating to the limitations on losses imposed by the consolidated return regulations on an affiliated group of corporations.

Description

Bloomberg Tax Portfolio, Consolidated Returns — Limitations on Losses, No. 757, analyzes the problems relating to the limitations on losses imposed by the consolidated return regulations on 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 the limitations imposed by the consolidated return regulations on the use of losses, such as the separate return limitation year rules and §382.
For a discussion of eligibility to file consolidated returns and the scope of the consolidated return regulations, see 754 T.M., Consolidated Returns — 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 — Investment in Subsidiaries. For an analysis of (1) the computation of separate taxable income; (2) the computation of consolidated income items, such as capital gain or loss and §1231 gain or loss; and (3) the computation of consolidated tax credits, see 756 T.M., Computation of Consolidated Tax Liability.

Table of Contents

I. Introduction
II. Separate Return Limitation Year Rules
III. Consolidated Return Change of Ownership Rules
IV. Section 382
V. Section 384
VI. SRLY Limitation on Built-In Losses
VII. At-Risk Rules
VIII. Disposition of Stock of a Subsidiary
IX. Passive Loss Rules
X. Section 267
XI. Dual Consolidated Loss Limitation
XII. Limitation on Use of Group Losses to Offset Income of a Subsidiary Paying Preferred Dividends
XIII. Reverse Acquisitions
XIV. Carrybacks and Carryovers to Separate Return Years
XV. Disposition of Stock of Parent by Member of Group

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