Adjustments to basis and other tax attributes apply upon a subsidiary joining or leaving a group.The effect on the selling member is deferred and recognized as the corresponding effects are recognized by the buying member.To the extent a member recognizes losses in excess of the owner's basis, such excess loss is treated as negative basis for all U. The adjustments “tier up” to consolidated return members who own shares of the entity making the adjustment. All members of the group must use the same tax year as the common parent.This may be adopted or changed by the common parent.For example, the United Kingdom has a system of group relief, which permits profits of one group company to be reduced by losses of another group company.
Countries which do not permit tax consolidation often have rules which provide some of the benefits.
There are typically complex rules to deal with the acquisition of companies with tax losses or other tax attributes.
Both the United States and Australia have rules which restrict the use of such losses in the wider group.
Assets can be transferred between group companies without triggering a tax on gain for the company receiving assets, dividends can be paid between group companies without incurring tax liabilities, and tax attributes of one group company such as imputation credits can be used by other companies in the group.
In some jurisdictions there may be other benefits, such as the ability to look through the acquisition of shares of acquired companies to depreciate the underlying assets.