Consolidated groups should consider deconsolidation.

• Author: Casinelli, Elio
• Position: Brief Article

Consolidated groups now have to consider whether they want to deconsolidate.

Rev. Proc. 95-11 addresses deconsolidation for tax years beginning in 1995. Because of the new investment adjustment rules, generally effective for tax years beginning in 1995, the IRS will permit deconsolidation, provided the group files an application before July 1, 1995 and each member enters into a closing agreement with the Service.

The terms of the agreement are quite onerous and will deter most groups from deconsolidating. Among the conditions for agreement are: (1) the group may not be able to reconsolidate for a 60-month period and (2) the statute of limitations for all prior consolidated return years not yet expired will be extended for at least five years.

These terms are similar to those of Rev. Proc. 91-71, which was released when the loss disallowance rules became final. Few companies...