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 22.214.171.124.2 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.
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