PLR 1113014: IRS permits consolidated filing after an inadvertent deconsolidation

Plain-English summary

The IRS permitted an affiliated group to file consolidated returns beginning after a subsidiary group had unintentionally ceased to be members of the parent's consolidated group. A holding company continued filing consolidated returns and included the former members because the deconsolidation went undiscovered. The parent represented that it would file amended returns to remove the former members' income, gains, deductions, losses, and credits for open tax years. The ruling allowed the consolidated filing under Treas. Reg. § 1.1502-75(f)(1), based on the submitted facts and representations.

Ruling snapshot

• Question: May the group file consolidated returns after the subsidiary group ceased to be members of the parent's consolidated group?
• Outcome: Approved.
• Key authorities: IRC §§ 1502, 1504, and 6110; Treas. Reg. § 1.1502-75(f)(1)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201113014 Third Party Communication: None
Release Date: 4/1/2011 Date of Communication: Not Applicable
Index Number: 1502.75-00
Person To Contact:
----------------------- --------------------------, ID No. -------------
------------------------------------------------ Telephone Number:
---------------------------------- ---------------------
--------------------------- Refer Reply To:
------------------------------- CC:CORP:01
PLR-131130-10
Date:
December 10, 2010

LEGEND

Parent = ------------------------------------------------
-------------------------------
------------------------

Taxpayer = ------------------------------------------
-------------------------------
------------------------

Date1 = ----------------------

Date2 = --------------------------

Date3 = ------------------

Date4 = --------------------------

Dear -------------:

  This letter responds to a letter dated July 12, 2010, requesting the consent of the

Commissioner to file a consolidated return under §1.1502-75(f)(1) of the Income Tax
Regulations. Additional information was received subsequently. The material
information submitted for consideration is summarized below.

  The rulings contained in this letter are based upon information and

representations submitted by the taxpayer and accompanied by a penalty of perjury
statement executed by an appropriate party. While this office has not verified any of the
material submitted in support of the request for rulings, it is subject to verification on
examination.

PLR-131130-10 2

                                      FACTS

   On Date1, a newly formed corporation, Parent, acquired all of the stock of

Taxpayer, the common parent of an affiliated group of corporations within the meaning
of section 1504 of the Internal Revenue Code (the “Code”). Parent’s only direct
subsidiary has been Taxpayer.

     Beginning with the taxable year ending Date2, Parent has filed a consolidated

return as the common parent of an affiliated group that included Taxpayer and
Taxpayer’s affiliates (“the Parent Group”). Parent is a holding company with minimal or
no activities of its own; all operations are conducted by Taxpayer or Taxpayer’s
affiliates.

     As the result of a modification of preferred stock of Taxpayer and a decline in the

value of its common stock, Taxpayer and Taxpayer’s affiliates deconsolidated from the
Parent Group on Date3. The deconsolidation, however, went undiscovered due to
inadvertence until recently. Consequently, Parent continued to file consolidated returns
and included Taxpayer and Taxpayer’s affiliates as members of the Parent Group (and
neither Taxpayer nor Taxpayer’s affiliates filed separate returns). Parent has
represented that on or before Date4, Parent will file amended returns for those taxable
years for which the period of limitations on assessment has not expired to remove the
income, gain, deduction, loss, and credit attributable to Taxpayer and Taxpayer’s
affiliates.

                                      RULING

    Based solely on the information provided and the representations made, we rule

as follows. The filing of a consolidated return by Taxpayer and Taxpayer’s affiliated
group of corporations (the “Taxpayer Group”) beginning after the Taxpayer Group
ceased to be members of the Parent Group is permitted. §1.1502-75(f)(1).

                                      CAVEAT

   Except as expressly provided herein, no opinion is expressed or implied

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.

                            PROCEDURAL MATTERS

  This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of

the Code provides that it may not be used or cited as precedent.

   A copy of this letter must be attached to any income tax return to which it is

relevant. Alternatively, taxpayers filing their returns electronically may satisfy this

PLR-131130-10 3

requirement by attaching a statement to their return that provides the date and control
number of the letter ruling.

     In accordance with the Power of Attorney on file with this office, a copy of this

letter is being sent to your authorized representative.

                                   Sincerely,



                                   T. Ian Russell
                                   Senior Counsel, Branch 5
                                   Office of Associate Chief Counsel (Corporate)