Definition:
An affiliated group is a group of corporations that are considered to be a single economic entity for tax purposes. This means that the profits and losses of the affiliated corporations are combined and treated as if they were a single entity.
Key points about affiliated groups:
- Common ownership: Affiliated groups are typically defined based on common ownership. For example, a group of corporations may be considered affiliated if a single person or entity owns a controlling interest in each corporation.
- Consolidated tax return: Affiliated groups can file a consolidated tax return, which allows them to combine their income and expenses and offset gains and losses between the affiliated corporations.
- Tax benefits: Filing a consolidated tax return can provide certain tax benefits, such as the ability to carry over losses from one corporation to another.
- Regulatory requirements: Affiliated groups may be subject to specific regulatory requirements, depending on the nature of their relationship and the industries they operate in.
Why is the concept of an affiliated group important?
- Tax planning: Understanding the concept of an affiliated group is important for effective tax planning.
- Regulatory compliance: Affiliated groups may be subject to specific regulatory requirements that differ from those applicable to individual corporations.
- Business strategy: Affiliated groups can be a powerful tool for business strategy, allowing companies to share resources, expertise, and risk.
In essence, an affiliated group is a group of corporations that are treated as a single economic entity for tax purposes, and understanding this concept is important for effective tax planning and business strategy.
