Tax Type
Corporation Income Tax
Description
Combined Returned
Topic
Corporate Distributions and Adjustments
Date Issued
12-20-1982
December 20, 1982
Re: §58-151.079; Permission to File Consolidated Return
Dear ********************
The parent corporation has requested permission to file a consolidated Virginia return including itself and its new subsidiary. The fiscal years of both corporations end on June 30. The subsidiary filed its first short year return for the taxable year ended June 30, 1981 on a separate basis thereby electing separate returns for the affiliated group.
The subsidiary was formed in approximately November, 1980 through the transfer of operating assets from the Parent. This constituted a §351 transfer for Internal Revenue Code purposes. In effect, this was merely the incorporation of an operating division of the Parent. The purpose of the incorporation was that certain technology had been developed by this division and there was a desire to increase its application. In order to do so, additional equity was needed for this division and, therefore, the plan to incorporate and attract outside equity investment was initiated. Subsequent to March 31, 1981, the corporation embarked on a program to register its securities, and offer same in the public market. Such plans continued until approximately January, 1982. However, because of market conditions, no registration or offering actually occurred, and all attempts at such were abandoned.
After the incorporation of the subsidiary, it was believed that the equity that would be raised via the public offering would reduce the Parent's ownership of the subsidiary below 80%, thereby losing control for federal and state tax consolidation purposes. Therefore, there appeared to be no reason to be concerned with the election to file a consolidated return as of the first fiscal year end of the subsidiary, June 30, 1981.
In view of the circumstances surrounding the initial election to file a separate return, and that only one such return for a short fiscal year has been filed, permission is hereby granted to file a consolidated return for the taxable year ended June 30, 1982 and thereafter.
Sincerely,
William H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner