Reorganization and Consolidated Tax Returns.
Reorganization and Consolidated Tax Returns: A consolidated Tax Return is a joint Tax is a combined tax return in the name of the main company which is filed by other companies working together as an organized set or group.
The Consolidated Tax Return is a way of permitting corporations that are a part of an It is a means of allowing corporations that are all part of an associated group to file together as one joint entity for a period like one year instead of each separate entity filing a divided or separate return.
The capability of companies filing for a consolidated tax return majorly depends on the nature of the relationship between the parent company and any subsidiary that constitutes the group.
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In this case, the company is considering expansion through reorganization. The company has 2 subsidiaries that operate under type B reorganization. Since the ABC Company has been operating under net losses, it is being targeted by the client for takeover.
The client will reduce the disadvantages from filling a consolidated return as a member of a controlled group because the client will gain from a reduction in the tax reporting process and reduce the chances of market decline.
Through filling for consolidation, the company will enjoy a reduction I costs in form of tax breaks which would not be possible as a single individual unit. In addition, the company would enjoy more profits and increase in efficiency.
Bittker, E. (2000). Federal income taxation of corporations and shareholders. New York Times
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