Instructions For Schedule O (Form 1120) - 2012 Page 4
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9other for certain tax benefits incurred
Apportionment of Tax Benefit
Special allocation rules for a short
by members separately and shared
Items
tax year. Special apportionment
by all members on the consolidated
rules apply to the tax bracket amount
Apportionment plan in effect. If the
tax return.
and the accumulated earnings credit,
component members of a controlled
if a component member has a short
An apportionment plan becomes
group have an apportionment plan in
tax year that does not include a
effective for a controlled group when it
effect, they must apportion the
December 31 date. A corporation's
is adopted by all the component
specified tax-benefit items, such as
tax year will end before the last day of
members of that group for their tax
the tax bracket amounts, according to
its annual tax year and will have a
years which are subject to the same
the terms of that plan. The component
short tax year if:
December 31 testing date. Once the
members of a group are not required
The corporation is sold to a
members of a controlled group adopt
to apportion equally any tax-benefit
consolidated group, or
an apportionment plan, it remains in
item among each of them. Nor is any
The corporation is merged or
effect until it is terminated.
component member required to adopt
liquidated, including a deemed
the same percentage of
Amending or terminating an ap-
liquidation resulting from a section
apportionment for each tax-benefit
portionment plan. An
338 election.
item. A group therefore may apportion
apportionment plan is amended when
Example. For years prior to 2012,
all, some, or none of the amount of
the same component members (for
any these tax-benefit items to a
Corporation X has been a member of
example, when no component
controlled group XYZ and has a
component member. However,
members have left or joined the group
calendar tax year. On May 31, 2012,
except for a member with a short tax
during their testing periods governed
year that does not include a
Corporation X is liquidated.
by the applicable December 31
Corporation X has a short tax year
December 31 testing date, the total
testing date) make any different
that begins on January 1, 2012, and
amount of a tax-benefit item
apportionment of the specified
apportioned to all the component
ends on May 31, 2012. Corporation X
tax-benefit items among themselves.
therefore applies the special
members of the group cannot be more
An apportionment plan is
allocation rule to the tax bracket
than the total amount of a tax item that
terminated when each component
amount and the accumulated
would be allowed to a corporation that
member of the controlled group
earnings credit.
is not subject to the limitations
consents or is deemed to consent to
imposed on the members of a
the termination of that plan. Each such
Determining the amount to be
controlled group. See Special
member is deemed to have
apportioned. A short-year member
allocation rules for a short tax year,
consented to the termination of the
cannot use the group's apportionment
below.
plan for a tax year if:
method for determining the amount of
No apportionment plan in effect. If
The controlled group ceased to
a tax-benefit item to be apportioned to
no apportionment plan is adopted or
it for its short tax year, even though
remain in existence (within the
in effect, the component members of
that method has been adopted by the
meaning of section 1563) as of the
a controlled group must divide the
testing date for that calendar year,
group under its existing
amount of any tax-benefit item equally
apportionment plan. Rather, the
A corporation that was a
among themselves (without regard to
short-year member must divide the full
component member of the group on
whether any members are also
amount of the tax-benefit item by the
the testing date in the preceding tax
members of a consolidated return
number of component members in the
year is not a component member on
group).
controlled group as of the last day of
the testing date in the current tax year,
that member's short tax year. That
or
Example. The Controlled Group
amount is the amount of that
A corporation that was not a
ABCDE consists of Corporations A, B,
tax-benefit item to be allocated to that
component member of the group on
C, D, and E. Corporations B, C, D,
member (and only to that member).
the testing date in the preceding tax
and E file a consolidated return.
The remaining component members
year is a component member on the
However, since the controlled group
will, in accordance with the terms of
testing date in the current tax year.
does not have an apportionment plan
their apportionment plan, apportion a
in effect, each member of the
Exception. If the members of a
full amount of each specified
consolidated group is treated as a
consolidated return group are treated
tax-benefit item between those
separate member of the controlled
as if they are one component
corporations which are the
group. Therefore, corporations A, B,
member, then changes as to the
component members of the group as
C, D, and E are required to allocate
members which belong to that
of the ensuing December 31 testing
one-fifth of the tax-bracketed income
consolidated group (as long as that
date.
amounts between them in the
consolidated group remains in
following manner:
Calculation of the additional
existence within the meaning of
$10,000 (one-fifth of $50,000) on
taxes. A component member with a
Regulations section 1.1502-75(d)) will
Part II, column (c),
short tax year determines its liability
not serve to terminate the group's
$5,000 (one-fifth of $25,000) on
for additional taxes imposed by
apportionment plan.
Part II, column (d), and
section 11(b)(1) solely for its own
$1,985,000 (one-fifth of
taxable income. The remaining
$9,925,000) on Part II, column (e).
component members will determine
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