(a) Controlled group of corporations (1) In general. (2) Parent-subsidiary controlled group. (3) Brother-sister controlled group (4) Combined group. (5) Life insurance controlled group. (6) Voting power of stock. (b) Component members (1) In general. (2) Excluded members. (3) Additional members. (4) Examples. (5) Application of constructive ownership rules. (c) Overlapping groups (1) In general. (2) Brother-sister controlled groups (d) Transitional rules (1) In general. (2) Limited nonretroactivity. (3) Election of general nonretroactivity. (4) Definitions. (5) Election to choose between membership in more than one controlled group. (6) Refunds. (e) Effective date (1) Applicability date. (2) Expiration date.
For
purposes of sections 1561 through 1563, the term controlled group of
corporations means any group of corporations which is either a parent-
subsidiary controlled group (as defined in paragraph (a)(2) of this section), a
brother-sister controlled group (as defined in paragraph (a)(3)(i) of this section), a combined group (as defined in
paragraph (a)(4) of this section), or a life insurance controlled group (as
defined in paragraph (a)(5) of this section). For the exclusion of certain
stock for purposes of applying the definitions contained in this paragraph, see
section 1563(c) and § 1.1563-2.
(i) The term parent-subsidiary controlled group means one or
more chains of corporations connected through stock ownership with a common
parent corporation if --
(A)
Stock possessing at least 80 percent of the total combined voting power of all
classes of stock entitled to vote or at least 80 percent of the total value of
shares of all classes of stock of each of the corporations, except the common
parent corporation, is owned (directly and with the application of § 1.1563-3(b)(1), relating to options) by one or more of the other
corporations; and
(B)
The common parent corporation owns (directly and with the application of §
1.1563-3(b)(1), relating to options) stock possessing
at least 80 percent of the total combined voting power of all classes of stock
entitled to vote or at least 80 percent of the total value of shares of all
classes of stock of at least one of the other corporations, excluding, in
computing such voting power or value, stock owned directly by such other corporations.
(ii)
The definition of a parent-subsidiary controlled group of corporations may be
illustrated by the following examples:
Example 1. P Corporation owns stock possessing 80 percent of the total
combined voting power of all classes of stock entitled to vote of S
Corporation. P is the common parent of a parent-subsidiary controlled group
consisting of member corporations P and S.
Example 2. Assume the same facts as in Example 1. Assume further that S owns
stock possessing 80 percent of the total value of shares of all classes of
stock of T Corporation. P is the common parent of a parent- subsidiary
controlled group consisting of member corporations P, S, and T. The result
would be the same if P, rather than S, owned the T stock.
Example 3. L Corporation owns 80 percent of the only class of stock of M
Corporation and M, in turn, owns 40 percent of the only class of stock of O
Corporation. L also owns 80 percent of the only class of stock of N Corporation
and N, in turn, owns 40 percent of the only class of stock of O. L is the
common parent of a parent-subsidiary controlled group consisting
of member corporations L, M, N, and O.
Example 4. X Corporation owns 75 percent of the only class of stock of Y and
Z Corporations; Y owns all the remaining stock of Z; and Z owns all the
remaining stock of Y. Since intercompany stockholdings are excluded (that is,
are not treated as outstanding) for purposes of determining whether X owns
stock possessing at least 80 percent of the voting power or value of at least
one of the other corporations, X is treated as the owner of stock possessing
100 percent of the voting power and value of Y and of Z for purposes of
paragraph (a)(2)(i)(B) of
this section. Also, stock possessing 100 percent of the voting power and value of
Y and Z is owned by the other corporations in the group within the meaning of
paragraph (a)(2)(i)(A) of this section. (X and Y
together own stock possessing 100 percent of the voting power and value of Z,
and X and Z together own stock possessing 100 percent of the voting power and
value of Y.) Therefore, X is the common parent of a parent-subsidiary
controlled group of corporations consisting of member corporations X, Y, and Z.
The
term brother-sister controlled group means two or more corporations if the same
five or fewer persons who are individuals, estates, or trusts own (directly and
with the application of the rules contained in § 1.1563-3(b)) stock possessing
more than 50 percent of the total combined voting power of all classes of stock
entitled to vote or more than 50 percent of the total value of shares of all
classes of stock of each corporation, taking into account the stock ownership
of each such person only to the extent such stock ownership is identical with
respect to each such corporation.
For
purposes of any provision of law (other than sections 1561 through 1563) that
incorporates the section 1563(a) definition of a controlled group, the term
brother-sister controlled group means two or more corporations if the same five
or fewer persons who are individuals, estates, or trusts own (directly and with
the application of the rules contained in § 1.1563-3(b)) stock possessing --
(A)
At least 80 percent of the total combined voting power of all classes of stock
entitled to vote or at least 80 percent of the total value of shares of all
classes of stock of each corporation (the 80 percent requirement);
(B)
More than 50 percent of the total combined voting power of all classes of stock
entitled to vote or more than 50 percent of the total value of shares of all
classes of stock of each corporation, taking into account the stock ownership
of each such person only to the extent such stock ownership is identical with
respect to each such corporation (the more-than-50 percent identical ownership
requirement); and
(C)
The five or fewer persons whose stock ownership is considered for purposes of
the 80 percent requirement must be the same persons whose stock ownership is
considered for purposes of the more-than-50 percent identical ownership
requirement.
The
principles of paragraph (a)(3)(ii) of this section may
be illustrated by the following examples:
Example 1. (i) The outstanding stock of
corporations P, Q, R, S, and T, which have only one class of stock outstanding is owned by the following unrelated individuals:
CORPORATIONS
Individuals P
Q R S
T Identical ownership
A ........................ 55% 51%
55% 55% 55%
51%
B ....................... 45% 49%
............... (45% in P & Q)
C ...................................45%
D.........................................45%
E .............................................45%
______________________________ ____ ____ _____ ____
Total ................. 100% 100% 100% 100% 100%
(ii)
Corporations P and Q are members of a brother-sister controlled group of
corporations. Although the more-than-50 percent identical ownership requirement
is met for all 5 corporations, corporations R, S, and T are not members because
at least 80 percent of the stock of each of those corporations is not owned by
the same 5 or fewer persons whose stock ownership is considered for purposes of
the more- than-50 percent identical ownership requirement.
Example 2. (i) The outstanding stock of
corporations U and V, which have only one class of stock outstanding, is owned
by the following unrelated individuals:
Corporations
Individuals
U V
A ....................................................... 12% 12%
B ....................................................... 12% 12%
C ....................................................... 12% 12%
D ....................................................... 12% 12%
E ....................................................... 13% 13%
F ....................................................... 13% 13%
G ....................................................... 13% 13%
H ....................................................... 13% 13%
Total .................................................. 100% 100%
(ii)
Any group of five of the shareholders will own more than 50 percent of the
stock in each corporation, in identical holdings. However, U and V are not
members of a brother-sister controlled group because at least 80 percent of the
stock of each corporation is not owned by the same five or fewer persons.
Example 3. (i) Corporation X and Y each have two
classes of stock outstanding, voting common and non-voting common. (None of
this stock is excluded from the definition of stock under section 1563(c).)
Unrelated individuals A and B own the following percentages of the class of
stock entitled to vote (voting) and of the total value of shares of all classes
of stock (value) in each of corporations X and Y:
Corporations
Individuals X Y
A .......................... 100%
voting, 60% value. 75% voting, 60% value.
B ........................ .. 0%
voting, 10% value. 25% voting, 10% value.
(ii)
No other shareholder of X owns (or is considered to own) any stock in Y. X and
Y are a brother-sister controlled group of corporations. The group meets the
more-than-50 percent identical ownership requirement because A and B own more
than 50 percent of the total value of shares of all classes of stock of X and Y
in identical holdings. (The group also meets the more-than-50 percent identical
ownership requirement because of A's voting stock ownership.) The group meets
the 80 percent requirement because A and B own at least 80 percent of the total
combined voting power of all classes of stock entitled to vote.
Example 4. Assume the same facts as in Example 3 except that the value of
the stock owned by A and B is not more than 50 percent of the total value of
shares of all classes of stock of each corporation in identical holdings. X and
Y are not a brother- sister controlled group of
corporations. The group meets the more- than-50 percent identical ownership
requirement because A owns more than 50 percent of the total combined voting
power of the voting stock of each corporation. For purposes of the 80 percent
requirement, B's voting stock in Y cannot be combined with A's voting stock in
Y since B, who does not own any voting stock in X, is not a person whose
ownership is considered for purposes of the more- than- 50 percent identical
ownership requirement. Because no other shareholder owns stock in both X and Y,
these other shareholders' stock ownership is not counted towards meeting either
the more-than- 50 percent identical ownership requirement or the 80 percent
ownership requirement.
(iv) Special rule if prior law applies.
Paragraph
(a)(3)(ii) of this section, as amended by TD 8179,
applies to taxable years ending on or after December 31, 1970. See, however,
the transitional rule in paragraph (d) of this section.
(i) The term combined group means any group of three or more
corporations if --
(A)
Each such corporation is a member of either a parent- subsidiary controlled
group of corporations or a brother-sister controlled group of corporations; and
(B)
At least one of such corporations is the common parent of a parent- subsidiary
controlled group and also is a member of a brother-sister controlled group.
(ii)
The definition of a combined group of corporations may be illustrated by the
following examples:
Example 1. Smith, an individual, owns stock possessing 80 percent of the
total combined voting power of all classes of the stock of corporations X and
Y. Y, in turn, owns stock possessing 80 percent of the total combined voting
power of all classes of the stock of corporation Z. X, Y, and Z are members of
the same combined group since --
(i) X, Y, and Z are each members of either a
parent-subsidiary or brother- sister controlled group of corporations; and
(ii)
Y is the common parent of a parent-subsidiary controlled group of corporations
consisting of Y and Z, and also is a member of a brother-sister controlled
group of corporations consisting of X and Y.
Example 2. Assume the same facts as in Example 1, and further assume that
corporation X owns 80 percent of the total value of shares of all classes of
stock of corporation T. X, Y, Z, and T are members of the same combined group.
(i) The term life insurance controlled group means two or
more life insurance companies each of which is a member of a controlled group
of corporations described in paragraph (a)(2), (a)(3)(i),
or (a)(4) of this section and to which § 1.1502-47(f)(6) does not apply. Such
insurance companies shall be treated as a controlled group of corporations
separate from any other corporations which are members of a controlled group
described in such paragraph (a)(2), (a)(3)(i), or
(a)(4). For purposes of this section, the common parent of the controlled group
described in paragraph (a)(2) of this section shall be
referred to as the common parent of the life insurance controlled group.
(ii)
The following examples illustrate the definition of a life insurance controlled
group. In these examples, L indicates a life company, another letter indicates
a nonlife company and each corporation uses the calendar year as its taxable
year.
For
purposes of this section, and §§ 1.1563-2 and 1.1563-3, in determining whether
the stock owned by a person (or persons) possesses a certain percentage of the
total combined voting power of all classes of stock entitled to vote of a
corporation, consideration will be given to all the facts and circumstances of
each case. A share of stock will generally be considered as possessing the
voting power accorded to such share by the corporate charter, by-laws, or share
certificate. On the other hand, if there is any agreement, whether express or
implied, that a shareholder will not vote his stock in a corporation, the
formal voting rights possessed by his stock may be disregarded in determining
the percentage of the total combined voting power possessed by the stock owned
by other shareholders in the corporation, if the result is that the corporation
becomes a component member of a controlled group of corporations. Moreover, if
a shareholder agrees to vote his stock in a corporation in the manner specified
by another shareholder in the corporation, the voting rights possessed by the stock
owned by the first shareholder may be considered to be possessed by the stock
owned by such other shareholder if the result is that the corporation becomes a
component member of a controlled group of corporations.
For
purposes of sections 1561 through 1563, a corporation is with respect to its
taxable year a component member of a controlled group of corporations for the
group's testing date if such corporation --
(A)
Is a member of such controlled group on such testing date and is not treated as
an excluded member under paragraph (b)(2) of this section; or
(B)
Is not a member of such controlled group on such testing date but is treated as
an additional member under paragraph (b)(3) of this
section.
For
purposes of sections 1561 through 1563, a member of a controlled group is a
corporation connected with other member(s) of a controlled group under the
stock ownership rules and the stock qualification rules set forth in section
1563. Under the above rules, for a corporation to qualify as a component member
of the group with respect to a group's December 31st testing date (or the
short-year testing date for a short-year member), that corporation does not
have to be a member of that group on that group's testing date. In addition, a
corporation that is a member of a controlled group on the group's testing date
does not necessarily qualify as a component member of that group with respect
to that testing date.
(A)
Testing date is the date used for determining the status of controlled group
members as either component members or excluded members. That testing date is
then also used to determine which taxable years of those component members are
to be subjected to the controlled group rules. Generally, a member's testing
date is the December 31st date included within that member's taxable year,
whether such member is on a calendar or fiscal taxable year. However, if a
component member of a controlled group has a short taxable year that does not
include a December 31st date, then the last day of that short taxable year
becomes that member's testing date; and
(B)
Testing period is the time period used for determining the status of controlled
group members as either component members or excluded members. The testing
period begins on the first day of a member's taxable year and ends on the day
before its testing date (Generally, the testing date is December 31st, but for
a component member having a short taxable year not ending on December 31st, the
testing date for the short taxable year of that member (and only that member)
becomes the last day of that member's short taxable year). Thus, for a member
on a fiscal taxable year, the portion of its taxable year beginning after
December 31st and ending on the last day of its taxable year is not taken into
account for determining its status as a component member or an excluded member.
(i) A corporation, which is a member of a controlled group
of corporations on the group's testing date, a date included within that
member's taxable year, but who was a member of such group for less than
one-half of the number of days of its testing period, shall be treated as an
excluded member of such group for that group's testing date.
(ii)
A corporation which is a member of a controlled group of corporations on a
testing date shall be treated as an excluded member of such group on such date
if, for its taxable year including such date, such corporation is --
(A)
Exempt from taxation under section 501(a) (except a corporation which is
subject to tax on its unrelated business taxable income under section 511) or
521 for such taxable year;
(B)
A foreign corporation not subject to taxation under section 882(a) for the
taxable year;
(C)
An S corporation (as defined in section 1361) for purposes of any tax benefit
item described in section 1561(a) to which it is not subject;
(D)
A franchised corporation (as defined in section 1563(f)(4)
and § 1.1563-4); or
(E)
An insurance company subject to taxation under section 801, unless such
insurance company (without regard to this paragraph (b)(2)(ii)(E)) is a
component member of a life insurance controlled group described in paragraph
(a)(5)(i) of this section or unless § 1.1502-47(f)(6)
applies (which treats a life insurance company, for which a section 1504(c)(2)
election is effective, as a member (whether eligible or ineligible) of a
life-nonlife affiliated group).
A
corporation shall be treated as an additional member of a controlled group of
corporations, that is, an additional component member, on the group's testing
date if it --
(i) Is not a member of such group
on such date;
(ii)
Is not described, with respect to such taxable year, in paragraph (b)(2)(ii)(A), (B), (C), (D), or (E) of this section; and
(iii)
Was a member of such group for one-half (or more) of the number of days in its
testing period.
The
provisions of this paragraph may be illustrated by the following examples:
Example 1. Brown, an individual, owns all of the stock of corporations W and
X on each day of 1964. W and X each uses the calendar year as
its taxable year. On January 1, 1964, Brown also owns all the stock of
corporation Y (a fiscal year corporation with a taxable year beginning on July
1, 1964, and ending on June 30, 1965), which stock he sells on October 15,
1964. On December 1, 1964, Brown purchases all the stock of corporation Z (a
fiscal year corporation with a taxable year beginning on September 1, 1964, and
ending on August 31, 1965). On December 31, 1964, W, X, and Z are members of
the same controlled group. However, the component members of the group on such
December 31 are W, X, and Y. Under paragraph (b)(2)(i) of this section, Z is treated as an excluded member of
the group on December 31, 1964, since Z was a member of the group for less than
one-half of the number of days (29 out of 121 days) during the period beginning
on September 1, 1964 (the first day of its taxable year) and ending on December
30, 1964. Under paragraph (b)(3) of this section, Y is
treated as an additional member of the group on December 31, 1964, since Y was
a member of the group for at least one-half of the number of days (107 out of
183 days) during the period beginning on July 1, 1964 (the first day of its
taxable year) and ending on December 30, 1964.
Example 2. On January 1, 1964, corporation P owns all the stock of
corporation S, which in turn owns all the stock of corporation S-1. On November
1, 1964, P purchases all of the stock of corporation X from the public and
sells all of the stock of S to the public. Corporation X owns all the stock of
corporation Y during 1964. P, S, S-1, X, and Y file their returns on the basis
of the calendar year. On December 31, 1964, P, X, and Y are members of a
parent-subsidiary controlled group of corporations; also, corporations S and
S-1 are members of a different parent-subsidiary controlled group on such date.
However, since X and Y have been members of the parent-subsidiary controlled
group of which P is the common parent for less than one-half the number of days
during the period January 1 through December 30, 1964, they are not component
members of such group on such date. On the other hand, X and Y have been
members of a parent-subsidiary controlled group of which X is the common parent
for at least one-half the number of days during the period January 1 through
December 30, 1964, and therefore they are component members of such group on
December 31, 1964. Also since S and S-1 were members of the parent-subsidiary
controlled group of which P is the common parent for at least one-half the
number of days in the taxable years of each such corporation during the period
January 1 through December 30, 1964, P, S, and S-1 are component members of
such group on December 31, 1964.
Example 3. Throughout 1964, corporation M owns all the stock of corporation
F which, in turn, owns all the stock of corporations L-1, L-2, X, and Y. M is a
domestic mutual insurance company subject to taxation under section 821, F is a
foreign corporation not engaged in a trade or business within the United
States, L- 1 and L-2 are domestic life insurance companies subject to taxation
under section 802, and X and Y are domestic corporations subject to tax under
section 11 of the Code. Each corporation uses the calendar year as its taxable
year. On December 31, 1964, M, F, L- 1, L-2, X, and Y are members of a
parent-subsidiary controlled group of corporations. However, under paragraph (b)(2)(ii) of this section, M, F, L-1, and L-2 are treated as
excluded members of the group on December 31, 1964. Thus, on December 31, 1964,
the component members of the parent-subsidiary controlled group of which M is
the common parent include only X and Y. Furthermore, since paragraph
(b)(2)(ii)(E) of this section does not result in L-1 and L-2 being treated as
excluded members of a life insurance controlled group, L-1 and L-2 are
component members of a life insurance controlled group on December 31, 1964.
For
purposes of paragraphs (b)(2)(i)
and (3) of this section, it is necessary to determine whether a corporation was
a member of a controlled group of corporations for one-half (or more) of the
number of days in its taxable year which precede the December 31 falling within
such taxable year. Therefore, the constructive ownership rules contained in §
1.1563-3(b) (to the extent applicable in making such determination) must be
applied on a day-by-day basis. For example, if P Corporation owns all the stock
of X Corporation on each day of 1964, and on December 30, 1964, acquires an
option to purchase all the stock of Y Corporation (a calendar-year taxpayer
which has been in existence on each day of 1964), the application of §
1.1563-3(b)(1) on a day-by-day basis results in Y being a member of the
brother- sister controlled group on only one day of Y's 1964 year which
precedes December 31, 1964. Accordingly, since Y is not a member of such group
for one-half or more of the number of days in its 1964 year preceding December
31, 1964, Y is treated as an excluded member of such group on December 31,
1964.
If
on a December 31 a corporation is a component member of a controlled group of
corporations by reason of ownership of stock possessing at least 80 percent of
the total value of shares of all classes of stock of the corporation, and if on
such December 31 such corporation is also a component member of another
controlled group of corporations by reason of ownership of other stock (that
is, stock not used to satisfy the at-least- 80 percent total value test)
possessing at least 80 percent of the total combined voting power of all
classes of stock of the corporation entitled to vote, then such corporation
shall be treated as a component member only of the controlled group of which it
is a component member by reason of the ownership of at least 80 percent of the
total value of its shares.
If
on a December 31, a corporation would, without the application of this
paragraph (c)(2), be a component member of more than one brother-sister
controlled group on such date, the corporation will be treated as a component
member of only one such group on such date. Such corporation may elect the
group in which it is to be included by including on or with its income tax
return for the taxable year that includes such date a statement entitled,
"STATEMENT TO ELECT CONTROLLED GROUP PURSUANT TO § 1.1563- 1T(c)(2)."
This statement must include--
(A)
A description of each of the controlled groups in which the corporation could
be included. The description must include the name and employer identification
number of each component member of each such group and the stock ownership of
the component members of each such group; and
(B)
The following representation: [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER
OF CORPORATION] ELECTS TO BE TREATED AS A COMPONENT MEMBER OF THE [INSERT
DESIGNATION OF GROUP].
If
more than one corporation would, without the application of this paragraph
(c)(2), be a component member of more than one controlled group, those
corporations electing to be component members of the same group must file a
single statement. The statement must contain the information described in
paragraph (c)(2)(i) of this
section, plus the names and employer identification numbers of all other
corporations designating the same group. The original statement must be
included on or with the original Federal income tax return (including any
amended return filed on or before the due date (including extensions) of such
return) of the corporation that, among those corporations which would (without
the application of this paragraph (c)(2)) belong to
more than one group, has the taxable year including such December 31 which ends
on the earliest date. That corporation must provide a copy of the statement to
each other corporation included in the statement and represent in its statement
that it has done so. Either the original or a copy of the statement must be
retained by each corporation as part of its records. See § 1.6001-1(e).
(A)
Election filed.
An
election filed under this paragraph (c)(2) is irrevocable and effective until a
change in the stock ownership of the corporation results in termination of
membership in the controlled group in which such corporation has been included.
(B)
Election not filed.
In
the event no election is filed in accordance with the provisions of this
paragraph (c)(2), then the Internal Revenue Service
will determine the group in which such corporation is to be included. Such
determination will be binding for all subsequent years unless the corporation
files a valid election with respect to any such subsequent year or until a
change in the stock ownership of the corporation results in termination of
membership in the controlled group in which such corporation has been included.
(iv)
The provisions of this paragraph (c)(2) may be
illustrated by the following examples (in which it is assumed that all the
individuals are unrelated):
Example 1. (i) On each day of 1970 all the
outstanding stock of corporations M, N, and P is held in the following manner:
Corporations
M N P
Individuals
A ......................................................55% 40% 5%
B ......................................................40% 20% 40%
C .......................................................5% 40% 55%
(ii)
Since the more-than-50 percent identical ownership requirement of section
1563(a)(2) is met with respect to corporations M and N
and with respect to corporations N and P, but not with respect to corporations
M, N, and P, corporation N would, without the application of this paragraph (c)(2),
be a component member on December 31, 1970, of overlapping groups consisting of
M and N and of N and P. If N does not file an election in accordance with
paragraph (c)(2)(i) of this
section, the Internal Revenue Service will determine the group in which N is to
be included.
Example 2. (i) On each day of 1970, all the
outstanding stock of corporations S, T, W, X, and Z is held in the following
manner:
Corporations
S T
W X Z
Individuals
D ................ 52 52 52
52 52
E .................40 2 2 2 2
F ..................2 40 2 2 2
G ................. 2 2 40 2 2
H ................. 2 2 2 40 2
I ..................2 2 2 2 40
(ii)
On December 31, 1970, the more-than-50 percent identical ownership requirement
of section 1563(a)(2) may be met with regard to any
combination of the corporations but all five corporations cannot be included as
component members of a single controlled group because the inclusion of all the
corporations in a single group would be dependent upon taking into account the
stock ownership of more than five persons. Therefore, if the corporations do
not file a statement in accordance with paragraph (c)(2)(ii)
of this section, the Internal Revenue Service will determine the group in which
each corporation is to be included. The corporations or the Internal Revenue
Service, as the case may be, may designate that three corporations be included
in one group and two corporations in another, or that
any four corporations be included in one group and that the remaining
corporation not be included in any group.
Treasury
decision 8179 amended paragraph (a)(3)(ii) of this
section to revise the definition of a brother- sister controlled group of corporations.
In general, those amendments are effective for taxable years ending on or after
December 31, 1970.
(i) Under the authority of section 7805(b), the Internal
Revenue Service will treat an old group as a brother-sister controlled group
corporations for purposes of applying sections 401, 404(a), 408(k), 409A, 410,
411, 412, 414, 415, and 4971 of the Code and sections 202, 203, 204, and 302 of
the Employment Retirement Income Security Act of 1974 (ERISA) in a plan year or
taxable year beginning before March 2, 1988, to the extent necessary to prevent
an adverse effect on any old member (or any other corporation), or on any plan
or other entity described in such sections (including plans, etc., of
corporations not part of such old group), that would result solely from the
retroactive effect of the amendment to this section by TD 8179. An adverse
effect includes the disqualification of a plan or the disallowance of a
deduction or credit for a contribution to a plan. The Internal Revenue Service,
however, will not treat an old member as a member of an old group to the extent
that such treatment will have an adverse effect on that old member.
(ii)
Section 7805(b) will not be applied pursuant to paragraph (d)(2)(i) of this section to treat an old member of an old group
as a member of a brother-sister controlled group to prevent an adverse effect
for a taxable year if, for that taxable year, that old member treats or has
treated itself as not being a member of that old group for purposes of sections
401, 404(a), 408(k), 409A, 410, 411, 412, 414, 415, and 4971 of the Code and
sections 202, 203, 204, and 302 and Title IV of ERISA for such taxable year
(such as by filing, with respect to such taxable year, a return, amended return,
or claim for credit or refund in which the amount of any deduction, credit,
limitation, or tax due is determined by treating itself as not being a member
of the old group for purposes of those sections). However, the fact that one or
more (but not all) of the old members do not qualify for section 7805(b)
treatment because of the preceding sentence will not preclude that old member
(or members) from being treated as a member of the old group under paragraph
(d)(2)(i) of this section in order to prevent the disallowance
of a deduction or credit of another old member (or other corporation) or to
prevent the disqualification of, or other adverse effect on, another old
member's plan (or other entity) described in the sections of the Code and ERISA
enumerated in such paragraph.
In
the case of a taxable year ending on or after December 31, 1970, and before
March 2, 1988, an old group will be treated as a brother-sister controlled
group of corporations for all purposes of the Code for such taxable year if --
(i) Each old member files a statement consenting to such
treatment for such taxable year with the District Director having audit
jurisdiction over its return within six months after March 2, 1988; and
(ii)
No old member
(A)
Files or has filed, with respect to such taxable year, a return, amended
return, or claim for credit or refund in which the amount of any deduction,
credit, limitation, or tax due is determined by treating any old member as not
a member of the old group; or
(B)
Treats the employees of all members of the old group as not being employed by a
single employer for purposes of sections 401, 404(a), 408(k), 409A, 410, 411,
412, 414, 415, and 4971 of the Code and sections 202, 203, 204, and 302 of
ERISA for such taxable year.
For
purposes of this paragraph (d)--
(i) An old group is a brother-sister controlled group of
corporations, determined by applying paragraph (a)(3)(ii) of this section as in
effect before the amendments made by Treasury decision 8179, that is not a
brother-sister controlled group of corporations, determined by applying
paragraph (a)(3)(ii) of this section as amended by such Treasury decision; and
(ii)
An old member is any corporation that is a member of an old group.
If--
(i) An old member has filed an election under paragraph (c)(2) of this section to be treated as a component member of
an old group for a December 31 before March 2, 1988; and
(ii)
That corporation would (without regard to such paragraph) be a component member
of more than one brother-sister controlled group (not including an old group)
on the December 31, that corporation may make an election under that paragraph
by filing an amended return on or before September 2, 1988. This paragraph (d)(5) does not apply to a corporation that is treated as a
member of an old group under paragraph (d)(3) of this section.
See
section 6511(a) for period of limitation on filing claims for credit or refund.
Paragraph
(b) of this section applies to any taxable year beginning on or after December
26, 2007. However, taxpayers may apply paragraph (b) of this section to any
Federal income tax return filed on or after December 26, 2007. Paragraphs (a)
and (b) (as contained in 26 CFR part 1 in effect on April 1, 2007), and
paragraphs (c)(1), (c)(2)(iv) and (d) of this section
apply to taxable years beginning on or after December 22, 2006. However,
taxpayers may apply the paragraphs described in the preceding sentence to any
Federal income tax return filed on or after December 22, 2006. Paragraphs (c)(2)(i) through (iii) of this
section apply to any original Federal income tax return (including any amended
return filed on or before the due date (including extensions) of such original
return) timely filed on or after May 30, 2006.
The
applicability of paragraph (b) of this section will expire on December 21,
2010. The applicability of paragraphs (a) and (b) (as contained in 26 CFR part
1 in effect on April 1, 2007), and paragraphs (c)(1),
(c)(2) (iv) and (d) of this section will expire on December 21, 2009. The
applicability of paragraphs (c)(2)(i)
through (iii) of this section will expire on May 26, 2009.