- 39 -
(or credited) to GMAC, and (3) the rate support deductions were
no longer deferred in the GM group's consolidated income tax
return (i.e., no consolidation adjustment was made pursuant to
section 1.1502-13(b)(2), Income Tax Regs.). Respondent further
argues that this change in the method of accounting could not be
effected without the Secretary's consent. See sec. 446(e).
Petitioner counters that the consolidated return regulations
in effect for 1985 were not a method of accounting. Furthermore,
petitioner contends that respondent is attempting to apply
retroactively the 1995 amendments to the consolidated return
regulations (1995 amendments), and that this is improper.
A. The Law
An affiliated group can make a consolidated return with
respect to the income tax imposed by chapter 1 in lieu of filing
separate returns. See sec. 1501. All members of the affiliated
group must consent to the consolidated return regulations
prescribed under section 1502 prior to the last day prescribed by
law for the filing of a consolidated return. See id. Filing a
consolidated return was considered such consent. See id.
Section 1502 provided:
The Secretary shall prescribe such regulations as
he may deem necessary in order that the tax liability
of any affiliated group of corporations making a
consolidated return and of each corporation in the
group, both during and after the period of affiliation,
may be returned, determined, computed, assessed,
collected, and adjusted, in such manner as clearly to
Page: Previous 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 NextLast modified: May 25, 2011