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Brenda Guy
Brenda Guy, Certified Public Accountant (CPA)
Category: Tax
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Experience:  20 years of working with income and estate tax issues for families and businesses.
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i have two corporations, each operating different operations

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i have two corporations, each operating different operations of the same business. same two owners or stock holders and all assets and income are mixed. I need to file one income tax return combining both bank accounts and assets. Can I do this and if so what form and instructions should I look for??
Submitted: 4 years ago.
Category: Tax
Expert:  Brenda Guy replied 4 years ago.
Chat Conversation Started
Brenda Guy :

You cannot do this. I would suggest that you form another corporation that would own the stock in the 2 corporations. This new corporation would be the parent corporation and would make an election on form 1122 to include the subsidiaries in its return. This only works going forward. You will have to do 2 separate returns for past years.

Customer :

could one of the two corporations be the parent and the other the subsidiary and I would use form 1122 ?

Brenda Guy :

Yes, the stockholders could transfer the stock in one to the other and then they could file a consolidated 1120 and make the election to file together on form 1122.

Customer :

that sounds like a good solution. but, will I only be filing one return and will the irs not be looking for the other return?

Brenda Guy :

The form 1122 puts them on notice that they are filing together. Both federal id#s will be disclosed in the consolidated return. This is a very common filing procedure when there are multiply corporations under one corporate owner.

Customer :

great, I looked at the form 1120 and I don't quickly see any where to elect to consolidate and make such an election. can you suggest a section or line number. ?

Brenda Guy :

The election is made by filing the 1122 with the 1120. The name of the corporation will need to have "and subsidiary" added to it. You will also mark page 3, line 5a yes and attach form 851 Affiliations schedule to the return. Reminder - you can't file this way retroactively, only forward.

Customer :

I haven't filed for 2009 as yet. I now want to file this way for 2009. will that be ok ?

Brenda Guy :

No, You will have to file 2 separate returns for 2009 and 2010 until the structure change is made. I know this is a pain but the law doesn't allow you to consolidate the entities unless they have a legal parent child relationship. It is a challenge but I think I would build a spreadsheet allocating between the 2 corporations so that you can put the income items on 2 separate returns. The balance sheet isn't as important. So maybe you could make it easier by putting the balance sheet on 1 Schedule L and putting entries on the other schedule L that just make it balance.

Brenda Guy :

As I said the important part is that all income is reported. If an IRS agent were to look at it he/she would care most that all income has been reported.

Brenda Guy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 151
Experience: 20 years of working with income and estate tax issues for families and businesses.
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Brenda Guy
Brenda Guy
Tax Professional
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20 years of working with income and estate tax issues for families and businesses.