Controlled Groups

In order to minimize an owner or groups of owners from dividing one corporation in multiple corporations for the sole purpose of lowering tax liabilities, IRC Section 1561 limits the benefits to equalize as if multiple corporations under that same ownership were one corporations.

The types of controlled groups are:

1. Parent - subsidiary group: one or more chains or corporations connected through stock ownership with a common parent

2. Brother -sister group: two or more corporations owned by the same five or fewer shareholders

3. Combined group: three or more corporations, each of which is a member of a parent-subsidiary or brother - sister group and one of which is a common parent and also included in a brother - sister group.

4. Consolidated group: members of a parent subsidiary group that file a consolidated tax return.

C Corporations which are part of a controlled group, must file a Schedule O Form 1120 under regulation Section 1.561-1T(a).