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C8-69 - ANSWER KEY P and S1 Corporations are members of an...

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ANSWER KEY P and S1 Corporations are members of an affiliated group at the beginning of the current year (a non-leap year). A and B Corporations are not included in the affiliated group because they are brother-sister corporations to P and fail to satisfy the Sec. 1504(a) stock ownership requirements (no single ownership chain includes both A and P or B and P Corporations). The sale of the A stock has no effect on the affiliated group for consolidated tax return purposes because A is not a member of the affiliated group at any time in the current year. The acquisition of the S2 stock by S1 creates a new member of the affiliated group. S1 owns the necessary 80% of the voting power and value of the S2 stock (excluding the nonconvertible, nonvoting preferred stock that is not considered to be "stock" under Sec. 1504(a)(4)). The affiliated group includes the income and expenses of S2 starting with the day after the November 25 acquisition date through December 31 (Reg. Sec. 1.1502-76(b)).
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