Tax Type
Corporation Income Tax
Description
Affiliated corporations; Short taxable year
Topic
Returns/Payments/Records
Date Issued
08-22-1988
August 22, 1988
Re: Virginia Code §58.1-442
Permission to File a Combined Return
Dear******************
This is in response to your recent telephone conversations with various members of the department's staff concerning the inclusion of short period tax returns in Virginia combined returns.
Facts
The department granted the taxpayer and seven affiliated corporations permission to file a combined return for the taxable year ended December 31, 1985, and subsequent years as each of the corporations met the requirements set forth in Virginia Corporation Income Tax Regulations §630-3-442.
On June 6, 1986, the above-referenced affiliate was sold. Upon audit, it was excluded from the group's combined return because it did not have a December 31, 1986, year end. The taxpayer points out that the former affiliate did have a December 31, 1986, year end but that two short period returns were filed because of the change of ownership.
The taxpayer asks that Virginia issue a ruling that companies who file a short period tax return be included in the Virginia combined return for the same period they are included in the federal consolidated income tax return.
Under federal consolidated return regulations, all corporations included must have the same fiscal year end. Special rules apply when short year returns are filed due to the acquisition or sale of a corporation -- two short year returns are filed for the periods before and after acquisition, and the group includes in the consolidated return the short year return for the period it owned the corporation (before a sale or after an acquisition). Virginia's combined return regulations do not contain a similar special rule for acquisitions and sales.
Although we do not adopt the federal consolidated return regulations for purposes of the Virginia combined return, we believe it is appropriate in this situation that the group include the short period return in the Virginia combined return for the company that was sold.
Determination
Accordingly, the auditor will adjust the audit to include the former affiliate in the Virginia combined return for the period January 1, 1986, to June 6, 1986.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner