Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 56-67

1956-1 C.B. 437

Sec. 1501

Caution: Distinguished by Rev. Rul. 76-393

IRS Headnote

Where an affiliated group of corporations has an election to make either consolidated or separate returns and has properly filed a consolidated Federal income tax return for a taxable year, the members of the affiliated group may file their returns on a separate basis on or before the due date of such returns, including any extension of time granted by the Commissioner, provided the payments theretofore made and to be made are adjusted in a manner satisfactory to the Commissioner. Similarly, a consolidated return may properly be filed on or before the due date notwithstanding the earlier filing of separate returns.

Full Text

Rev. Rul. 56-67

A question has been presented as to whether an affiliated group of corporations having properly filed a consolidated return may, on or before the due date of such return, file their returns on a separate basis.

Section 1.1502-10(a) of the Income Tax Regulations, T.D. 6140 /1/, provides in part as follows:

(a) When privilege must be exercised .-The privilege of making a consolidated return under section 1502 for any taxable year of an affiliated group must be exercised at the time of making the return of the common parent corporation for such year. For this purpose, the return is considered as made on the due date of such return (including any extensions of time granted by the Commissioner), regardless of the actual previous date of filing. Under no circumstances can such privilege be exercised at any time thereafter. The filing of separate returns for a taxable year does not constitute an election binding upon the corporation in subsequent years. If the privilege is exercised at the time of making the return, separate returns cannot thereafter be made for such year. * * *

Under section 1.1502-10(b) of the Regulations, it is provided that in no case will the privilege under paragraph (a) be considered as exercised at the time of making a so-called `tentative return' made, for example, in order to obtain an extension of time for making the return required by law.

I.T. 2535, C.B. IX-1, 125 (1930), holds that separate returns filed by a husband and wife before the last day for filing such returns should be accepted as properly substituted for a joint return previously filed. Also see I.T. 3775, C.B. 1946-1, 76, and G.C.M. 21227, C.B. 1939-1 (Part 1), 191. The principles set forth in the above cited rulings are equally applicable to the present question.

For example, a group of affiliated corporations on a dalendar year basis properly elected and filed a consolidated return for 1954 on March 15, 1955. Revenue Ruling 55-174, C.B. 1955-1, 141, extended, to September 15, 1955, the time for filing such returns. Therefore, the members of the affiliated group, on or prior to such date, could have properly filed their returns on a separate basis.

Accordingly, where an affiliated group of corporations has an election to make either consolidated or separate returns and has properly filed a consolidated Federal income tax return for a taxable year, the members of the affiliated group may file their returns on a separate basis on or before the due date of such returns, including any extension of time granted by the Commissioner, provided the payments theretofore made and to be made are adjusted in a manner satisfactory to the Commissioner. Similarly, a consolidated return may properly be filed on or before the due date notwithstanding the earlier filing of separate returns.

/1/ T.D. 6140, C.B. 1955-2, 317 at 323.