Instructions For Schedule O (Form 1120) - 2011 Page 2
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9section 1563(a)(1), stock owned by a
any parent-subsidiary, brother-sister,
determined. See Testing date and
corporation means:
or combined controlled group will be
Testing period.
•
Stock owned directly by the
treated as a controlled group of
Note. If a controlled group has an
corporation, and
corporations separate from any other
apportionment plan in effect and
•
Stock constructively owned by that
type of controlled group to which
some of the members of that
corporation under sections
these corporations would otherwise
controlled group join in filing a
1563(e)(1), (2), and (3).
belong if they were not life insurance
consolidated return, then the
companies. The life insurance
Brother-sister group. A
members of that consolidated group
companies that make up a life
brother-sister group generally is two
are treated, together, as if they were
insurance controlled group do not
or more corporations where the same
a single member of the controlled
have to be in a direct ownership
five or fewer persons who are
group. If a controlled group does not
relationship with each other.
individuals, estates, or trusts directly
have an apportionment plan in effect
or indirectly own stock possessing:
and any of the members of that group
Example. Life insurance
•
At least 80% of the total combined
join in filing a consolidated return,
companies Corporation X and
voting power of all classes of stock
then each member of that
Corporation Z make up a life
entitled to vote or at least 80% of the
consolidated group will be treated as
insurance company only group,
total value of shares of all classes of
a separate member of the controlled
where Corporation X, a life insurance
the stock of each corporation (the
group.
company, owns all the stock of
80% test), and
Corporation Y, a non-life insurance
Additional member. A member of a
•
More than 50% of the total
company, and Corporation Y, a
controlled group is treated as an
combined voting power of all classes
non-life insurance company owns all
additional member if the corporation:
of stock entitled to vote or more than
the stock of Corporation C, a life
•
Was a member of the controlled
50% of the total value of shares of all
insurance company.
group at any time during a calendar
classes of stock of each corporation,
year,
Exception for life-nonlife
taking into account the stock
•
Was not a member of the
consolidated group. The rule
ownership of each such person only
controlled group on that testing date,
above does not apply to any life
to the extent such stock ownership is
•
Was a member of the controlled
insurance company that is a member
identical with respect to each such
group for at least one-half the number
(whether eligible or ineligible to join in
corporation (the 50% test).
of days of its testing period, and
filing a consolidated return) of a
Brother-sister group for
•
Is not an excluded member
life-nonlife affiliated group for which a
purposes of certain tax attributes.
(defined next).
section 1504(c)(2) election is in
For purposes of allocating the
effect. Instead, an eligible life
Any member of a controlled group
following, a brother-sister group is
insurance company will be treated as
that is treated as an additional
defined using only the 50% test
a member of a life-nonlife
member is also treated as a
above:
consolidated group, and an ineligible
•
component member of that group.
The taxable income brackets,
life insurance company will be treated
•
The additional taxes,
Excluded member. A corporation is
as a member of a life-nonlife
•
The alternative minimum tax (AMT)
treated as an excluded member of a
controlled group (deemed to
exemption amount,
controlled group of corporations on
constitute a parent-subsidiary
•
The reduction of the AMT
the December 31 testing date for its
controlled group).
exemption amount, and
tax year that includes that December
•
The accumulated earnings credit.
Component Member
31 testing date, if the corporation is:
•
A member of such group for less
For purposes of determining
A corporation qualifies as a
than one-half the number of days in
whether a corporation is a member of
component member of a controlled
its testing period,
a brother-sister controlled group of
group of corporations, for a tax year,
•
Exempt from tax under section
corporations within the meaning of
if the corporation:
501(a) (except a corporation which is
•
section 1563(a)(2), stock owned by a
Is not a member of the controlled
subject to tax on its unrelated
person who is an individual, estate, or
group on the applicable December 31
business taxable income under
trust includes:
testing date (defined below), but is
•
section 521) for such year,
Stock owned directly by such
treated as an additional member
•
A foreign corporation not subject to
person, and
(defined below); or
•
tax under section 882(a) for such tax
•
Stock constructively owned under
Is a member of the controlled
year,
section 1563(e).
group on the applicable December 31
•
A life insurance company subject to
testing date and is not treated as an
Combined group. A combined
tax under section 801 other than
excluded member (defined below).
controlled group is three or more
either a life insurance company which
corporations each of which is a
In general, in determining if a
is a member of a life insurance
member of either a parent-subsidiary
member of a controlled group is a
controlled group or a life insurance
group or a brother-sister group, and
component member of that group, the
company which is a member
at least one of which is both the
applicable tax year of that corporation
(whether eligible or ineligible) of a
common parent of a
must be tested to determine if it was
life-nonlife affiliated group for which a
parent-subsidiary group and also a
a member of the controlled group for
section 1504(c)(2) election is in
member of a brother-sister group.
at least one-half of the number of
effect,
•
Life insurance companies only
days in its testing period. Also, in
Not a franchised corporation as
group. Two or more life insurance
order to determine the applicable tax
defined in section 1563(f)(4), or
•
companies subject to tax under
year of the member being tested, the
An S corporation, as defined in
section 801 which are members of
group’s testing date must be
section 1361.
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