The IRS recently released guidance (ILM 202231014) addressing which party is considered the default successor and agent for a consolidated group and how to properly execute and submit Form 872, “Consent to Extend the Time to Assess Tax,” following a merger.
In ILM 202231014, a buyer corporation (“Buyer”), and common parent of a consolidated group, sought to acquire a target corporation (“Target”)—also the common parent of a consolidated group. Buyer formed a transitory merger subsidiary that merged with and into Target in the first step of the overall plan. Target then merged with and into a new company (“Newco”) formed by Buyer. Thus, Target ceased to exist—as it subsequently became a division of Newco—and the Target group ceased to exist, as the transaction was stated not to be a reverse acquisition.
The memorandum concludes that Newco is the default successor and agent for the Target group for applicable tax years. Furthermore, as the default successor, and therefore the agent, Newco is the proper party to execute and submit Forms 872 for Target consolidated group’s applicable tax years (in particular, the final short year).
ILM 202231014 also addresses how Form 872 for such Target consolidated group tax years should be completed. The IRS recommends the following:
- The name at the top of the first page of Form 872 should read as follows: “Newco (EIN: ##-#######), successor by merger to Target (EIN ##-#######), and as agent for Target (EIN ##-#######) and Subsidiaries consolidated group*”
- At the bottom of the consent, taxpayers should state the following: “*This is with respect to the consolidated tax of Target (EIN ##-#######) and Subsidiaries consolidated group.”
- In the signature block, on page 2 of the Form 872, “Newco (EIN: ##-#######),” the name of the corporation that is the agent, must be typed on the “Corporate Name” line, followed by the signature, date and title of a current officer of Newco who can bind Newco.
For further guidance on drafting Form 872 reference IRM 25.6.22.6.2 for Corporations, which includes subsections on consolidated returns; subsidiaries as partners and as members of a consolidated return; parent and subsidiary corporations; dissolved corporations; and merged corporations.
Contact:
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.