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Consolidated Tax Returns Pose Challenges for Business Growth, Say Experts

NEWS RELEASE

Contacts:
Mark Carrington
(703) 341.5880
mcarrington@bna.com

Arlington, Va. (June 22, 2009) – With the growing trend of businesses seeking sustainability through merger and acquisition, company accountants need to be increasingly mindful of the often complex tax consequences, particularly when the transaction takes place in a consolidated group, says author George White in BNA’s latest analysis, Consolidated Returns—Investment in Subsidiaries. This Portfolio (#755-3 in the U.S. Income Series) is one of several BNA portfolios that examine these complications and provides guidance and analysis for complying with the byzantine consolidated return regulations and producing accurate tax results.

“Consolidated returns can be a tax minefield,” reports senior BNA tax analyst Glenn Davis. He adds, “Ownership of subsidiary stock within an affiliated group creates significant challenges for organizations filing consolidated returns; applying separate tax rules to separate entities results in an unjustified single-tax liabilities; and shifts of equity within the group lead to substantially different tax results from economically similar transactions within a single corporation with several divisions. Intercompany transactions could lead to discontinuities in the earnings and profits of group members.”

Attorney and CPA White analyzes the adjustments made to the basis of subsidiary stock to reflect the subsidiary’s income or losses, and looks at the general rules for separate return tax treatment, available basis adjustments for consolidated returns, and basis adjustments on subsidiary stock after disposition or deconsolidation. He then describes the provisions in the regulations that minimize the tax consequences of intercompany dividends and nondividend transactions, and examines the special treatment of intercompany liquidations and redemptions.

Consolidated Returns—Investment in Subsidiaries also describes the restoration to income of “excess losses,” amounts previously deducted as losses of a subsidiary that exceed the group’s economic investment of the subsidiary. This Portfolio considers the general rules regarding worthlessness, character of income, basis of “excess loss account” stock, and circular basis adjustments.

George L. White, Esquire, earned a B.A. from Holy Cross College, an M.B.A. from the University of Pennsylvania, and an LL.B. from Harvard University. He is an attorney licensed to practice in Massachusetts and a Certified Public Accountant licensed in Massachusetts.

About BNA Tax & Accounting
BNA Tax & Accounting is the foremost source of news, analysis, and practice tools for tax attorneys, estate planners, accountants, and corporate tax and financial accounting professionals. For more than 50 years, BNA Tax & Accounting has offered practitioners expert insights and guidance on every significant issue in tax planning and financial accounting. Written by practitioners for practitioners, BNA’s award-winning Portfolios offer topic-driven, in-depth guidance on transactions designed to help tax professionals achieve new levels of excellence and client service. Visit BNA Tax & Accounting online at www.bnatax.com.

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BNA is the leading independent publisher of print and electronic news and information for professionals in business and government. BNA produces more than 300 news services, including the highly respected Daily Labor Report, U.S. Law Week,and Daily Report for Executives. Visit BNA online at www.bna.com