Instructions For Schedule O (Form 1120) - 2011 (Page 4 of 9) in pdf

Determining the amount to be

group during their testing periods

more than the total amount of a tax

apportioned. A short-year member

governed by the applicable

item that would be allowed to a

December 31 testing date) make any

corporation that is not subject to the

cannot use the group’s apportionment

different apportionment of the

limitations imposed on the members

method for determining the amount of

specified tax-benefit items among

of a controlled group. See Special

a tax-benefit item to be apportioned

themselves.

allocation rules for a short tax year,

to it for its short tax year, even though

below.

that method has been adopted by the

An apportionment plan is

group under its existing

terminated when each component

No apportionment plan in effect. If

apportionment plan. Rather, the

member of the controlled group

no apportionment plan is adopted or

short-year member must divide the

consents or is deemed to consent to

in effect, the component members of

full amount of the tax-benefit item by

the termination of that plan. Each

a controlled group must divide the

the number of component members

such member is deemed to have

amount of any tax-benefit item

in the controlled group as of the last

consented to the termination of the

equally among themselves (without

day of that member’s short tax year.

plan for a tax year if:

regard to whether any members are

That amount is the amount of that

•

The controlled group ceased to

also members of a consolidated

tax-benefit item to be allocated to that

remain in existence (within the

return group).

member (and only to that member).

meaning of section 1563) as of the

The remaining component members

testing date for that calendar year,

Example. The Controlled Group

•

will, in accordance with the terms of

A corporation that was a

ABCDE consists of Corporations A,

their apportionment plan, apportion a

component member of the group on

B, C, D, and E. Corporations B, C, D,

full amount of each specified

the testing date in the preceding tax

and E file a consolidated return.

tax-benefit item between those

year is not a component member on

However, since the controlled group

corporations which are the

the testing date in the current tax

does not have an apportionment plan

component members of the group as

year, or

in effect, each member of the

of the ensuing December 31 testing

•

A corporation that was not a

consolidated group is treated as a

date.

component member of the group on

separate member of the controlled

the testing date in the preceding tax

Calculation of the additional

group. Therefore, corporations A, B,

year is a component member on the

taxes. A component member with a

C, D, and E are required to allocate

testing date in the current tax year.

short tax year determines its liability

one-fifth of the tax-bracketed income

for additional taxes imposed by

Exception. If the members of a

amounts between them in the

section 11(b)(1) solely for its own

consolidated return group are treated

following manner:

taxable income. The remaining

as if they are one component

•

$10,000 (one-fifth of $50,000) on

component members will determine

member, then changes as to the

Part II, column (c),

their additional taxes based on their

members which belong to that

•

$5,000 (one-fifth of $25,000) on

own combined income.

consolidated group (as long as that

Part II, column (d), and

consolidated group remains in

AMT calculation. If a component

•

$1,985,000 (one-fifth of

existence within the meaning of

member has a short tax year,

$9,925,000) on Part II, column (e).

Regulations section 1.1502-75(d)) will

whether or not that tax year includes

not serve to terminate the group’s

a December 31 testing date, see the

Special allocation rules for a short

apportionment plan.

annualization rule of section 443(d)

tax year. Special apportionment

for calculating the member’s AMT.

rules apply to the tax bracket amount

Apportionment of Tax

and the accumulated earnings credit,

See section 1561 and the related

Benefit Items

if a component member has a short

regulations for additional details

Apportionment plan in effect. If

tax year that does not include a

regarding apportionment plans and a

December 31 date. A corporation’s

the component members of a

listing of some of the tax-benefit

tax year will end before the last day

controlled group have an

items.

of its annual tax year and will have a

apportionment plan in effect, they

Exceptions. This special

short tax year if:

must apportion the specified

apportionment rule does not apply if a

•

tax-benefit items, such as the tax

The corporation is sold to a

component member has a short tax

bracket amounts, according to the

consolidated group, or

year that includes the December 31

terms of that plan. The component

•

The corporation is merged or

testing date in its short tax year. For

members of a group are not required

liquidated, including a deemed

example, Corporation Y is a fiscal

to apportion equally any tax-benefit

liquidation resulting from a section

year taxpayer with a tax year ending

item among each of them. Nor is any

338 election.

on September 30. On January 31,

component member required to adopt

2011, Corporation Y is liquidated.

Example. For years prior to 2011,

the same percentage of

Corporation Y’s tax year beginning on

apportionment for each tax-benefit

Corporation X has been a member of

October 1, 2010, and ending on

item. A group therefore may

controlled group XYZ and has a

January 31, 2011, is not a short tax

apportion all, some, or none of the

calendar tax year. On May 31, 2011,

year within the meaning of section

amount of any these tax-benefit items

Corporation X is liquidated.

1561(b). Thus, the normal

to a component member. However,

Corporation X has a short tax year

apportionment rules apply.

except for a member with a short tax

that begins on January 1, 2011, and

year that does not include a

ends on May 31, 2011. Corporation X

This special allocation rule also

December 31 testing date, the total

therefore applies the special

does not apply if a member of a

amount of a tax-benefit item

allocation rule to the tax bracket

controlled group has a short tax year

apportioned to all the component

amount and the accumulated

and is a member of a consolidated

members of the group cannot be

earnings credit.

group. Instead, such corporation’s

-4-

Instructions For Schedule O (Form 1120) - 2011 Page 4

Related Articles

Related forms

Related Categories