Vanderbilt Law Review

First Page



Corporations comprising an affiliated group may elect to file a consolidated tax return. However, once such an election is made, the affiliated group may not discontinue such filing in subsequent years with out the prior consent of the Commissioner of the Internal Revenue Service(IRS).' The continuous filing requirement is necessary to prevent the abuses that would occur if corporations within an affiliated group could choose whether to file separate returns or a consolidated return for a given year. A complex set of regulations specify under what circumstances the Commissioner will consider an affiliated group as continuing in existence so as to require continuous consolidated filing. Unfortunately, these rules were not crafted with divisive reorganizations in mind, and consequently, the regulations are often ineffective in dealing with these transactions, offering a taxpayer, in many instances, the opportunity to opt out of consolidation despite the contrary intention of the statute and the regulations. This Article will analyze the regulations' inconsistencies and deficiencies pertaining to divisive transactions and will suggest changes that would allow the regulatory pattern to achieve its intended purpose.