Consolidated C-Corp

Technical topics regarding tax preparation.
#1
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Parent and it's subsidiary have always filed separate C-Corporation tax returns. In 2019, the subsidiary sold all of it's assets. The subsidiary will continue to receive payments from the sale through 2020, so the Corporation will remain open until at least 12/31/20.

The parent has a $400,000 tax ioss for 2019. The subsidiary has a gain on the sale of it's assets of about $6 million.

Two questions:

1) is there any issue filing a consolidated corporate return for 2019?

2) The subsidiary has a $300k section 179 carryforward. Would that transfer to the consolidated 2019 Corporate tax return?
 

#2
Nilodop  
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1) is there any issue filing a consolidated corporate return for 2019? . That's a really broad question, but if you mean are they allowed to file consolidated for 2019, yes they are. Is your concern whether the sub's gain going can be offset by the parent's loss? If so, it seems not, because (I assume) you've not had an acquisition of a loss company and you've not had a change of ownership. By "it seems not", I mean not an issue.

Consolidated returns are interesting, and fun to deal with. For fun and to be sure you're OK, you might read these regs., which won't take all that long:
1.1502-1
1.1502-15
1.1502-21
1.1502-22
1.1502-75

Reg. 1.179-1(f) tells you what happens to the 179 carryover.
Last edited by Nilodop on 12-Jan-2020 2:03pm, edited 2 times in total.
 

#3
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Yes, main motivation is to use the parent's loss to offset sub's gain.
 

#4
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One additional thing I didn't think about.

The parent owns commercial real estate and has generated a 400k loss. Can this loss be used to offset the income of the subsidiary? The subsidiary had an asset sale which makes up it's $6 million of profit.

I'm unsure about the passive activity rules in a C-Corp.
 

#5
Nilodop  
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I'm unsure about the passive activity rules in a C-Corp.. They apply to a closely held C corp.

Is the parent's commercial rental a passive activity?

Was the subsidiary's business a passive activity?

Did the parent rent its property to the subsidiary?

Will the property be sold?

I don't know if all of that matters, but some probably does.
 

#6
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It appears that a closely held C-Corp can deduct passive rental losses against all income, except portfolio income.
 


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