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Consolidated Tax Return Requirements

Consolidated tax returns must be calculated for each corporate member’s separately stated taxable income. The consolidated tax return will eliminate the intercompany transactions from the consolidated tax return.

When consolidated tax returns are filed, any sales made between the members of the affiliated group will become eliminated. Only when a sale has been made to an outside third party will any gain or loss become recognized. Separate items that are subject to special tax treatment will include:

Affiliated Group Requirements: 

In order to be meet the criteria to be considered an affiliated group, the organization must meet the following: 

  • The parent company directly owns at least 80% of the voting rights of the corporation’s stock. 
  • The parent company directly owns at least 80% of the overall stock value of the subsidiary corporation. 
  • The stock may be owned directly by one or more of the other corporations within the affiliated group.

There are often pros and cons to filing a consolidated tax return. Some of the key characteristics involved in filing a consolidated tax return include:

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