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Form 851 (Rev. 10-2016) Page 4
Instructions Part I Item (e). The term “equitable owners” of
Section references are to the Internal Revenue Portion of overpayment credits and stock means those that essentially have all
Code unless otherwise noted. estimated tax payments. Enter for the the rights to enjoy the benefits of stock
common parent corporation and for each ownership without actually holding the stock,
Future Developments subsidiary corporation the amount of: for example, beneficiaries of a trust.
For the latest information about developments • Overpayments of tax from the prior tax year Part IV
related to Form 851 and its instructions, such that each corporation elected to credit to the Question 1. For purposes of question 1 only,
as legislation enacted after they were current year's tax, and disregard certain preferred stock as described
published, go to www.irs.gov/form851. • Estimated tax payments made by each in section 1504(a)(4).
Purpose of Form corporation. Question 3. The term “arrangement”
Use Form 851 to: The total must be the same as the amounts includes, but is not limited to, phantom stock,
1. Identify the common parent corporation entered on the lines for overpayments and stock appreciation rights, an option, warrant,
and each member of the affiliated group; estimated tax payments on the consolidated conversion feature, or similar arrangements.
income tax return. Item 3a. Show the percentage of the value of
2. Report the amount of overpayment Tax deposited with Form 7004. Enter for the the outstanding stock that the person(s) could
credits, estimated tax payments, and tax common parent the tax deposited with Form acquire.
deposits attributable to each corporation; and 7004, Application for Automatic Extension of Item 3b. If the arrangement was associated
3. Determine that each subsidiary Time To File Certain Business Income Tax, with voting stock, show the percentage of
corporation qualifies as a member of the Information, and Other Returns, that is outstanding voting stock that the person(s)
affiliated group. attributable to each corporation. The total could acquire.
Who Must File must be the same as the amount entered on Item 3c. If the arrangement was associated
The parent corporation must file Form 851 for the “Tax deposited with Form 7004” line on with the acquisition of voting power without
itself and for corporations in the affiliated the consolidated income tax return. the acquisition of the related stock, show the
group. File Form 851 by attaching it to the Part II percentage of voting power that the person(s)
consolidated tax return for the group. Principal business activity (PBA) and PBA could acquire.
Affiliated Group Code No. Enter the PBA and the PBA code Item 3d. Give a brief description of any
An affiliated group is one or more chains of number for the common parent corporation arrangement (defined above) by which a
includible corporations connected through and for each subsidiary corporation. Use the person that is not a member of the affiliated
stock ownership with a common parent activity for the specific industry group from group could acquire any stock, or acquire any
corporation. See sections 1504(a) and (b). The which the largest percentage of each voting power without acquiring stock, in the
common parent must be an includible corporation's total receipts is based. corporation.
corporation and the following requirements A list of the PBAs and code numbers is
must be met. located in the Instructions for Form 1120. Paperwork Reduction Act Notice
1. The common parent must own directly Nondividend distributions. Nondividend We ask for the information on this form to
stock that represents at least 80% of the total distributions are any distributions (other than carry out the Internal Revenue laws of the
voting power and at least 80% of the total stock dividends and distributions in exchange United States. You are required to give us the
value of the stock of at least one of the other for stock) made to shareholders during the information. We need it to ensure that you are
includible corporations. tax year for which the consolidated tax return complying with these laws and to allow us to
2. Stock that represents at least 80% of is filed that were in excess of the figure and collect the right amount of tax.
the total voting power, and at least 80% of corporation's current and accumulated You are not required to provide the
the total value of the stock of each of the earnings and profits. See sections 301 and information requested on a form that is
other corporations (except for the common 316 and Form 5452, Corporate Report of subject to the Paperwork Reduction Act
parent) must be owned directly by one or Nondividend Distributions. unless the form displays a valid OMB control
more of the other includible corporations. Part III number. Books or records relating to a form
or its instructions must be retained as long as
For this purpose, the term “stock” generally Question (c). For this purpose, the term their contents may become material in the
doesn't include any stock that: “transfer” includes transactions in which (1) a administration of any Internal Revenue law.
1. Is nonvoting, shareholder-member ceases to own a share Generally, tax returns and return information
2. Is nonconvertible, of subsidiary stock in a transaction in which are confidential, as required by section 6103.
3. Is limited and preferred as to dividends the shareholder-member recognizes income, The time needed to complete and file this
and doesn't participate significantly in gain, deduction, or loss on the stock; (2) a form will vary depending on individual
corporate growth, and shareholder-member and the subsidiary circumstances. The estimated burden for
4. Has redemption and liquidation rights cease to be members of the same business taxpayers filing this form is
that don't exceed the issue price of the stock consolidated group; and (3) a nonmember approved under OMB control number
(except for a reasonable redemption or acquires the share from a member. If any type 1545-0123 and is included in the estimates
liquidation premium). of transfer occurs and the share's basis would shown in the instructions for their business
otherwise exceed its value at the time of the
Address transfer, certain adjustments to members' income tax return.
Include the suite, room, or other unit number bases in shares of the subsidiary's stock and If you have comments concerning the
after the street address. If the post office to the subsidiary's attributes may be required. accuracy of these time estimates or
does not deliver mail to the street address See Regulations section 1.1502-36. suggestions for making this form simpler, we
and the corporation has a P.O. box, show the Question (d). If a share of subsidiary stock would be happy to hear from you. See the
box number instead. becomes worthless within the meaning of instructions for the tax return with which this
section 165 (taking into account the form is filed.
Corporation Numbers provisions of Regulations section
When listing information in Parts II, III, and IV, 1.1502-80(c)) during the group's taxable year,
use the same number for the common parent certain adjustments to shareholder-members'
corporation and for each subsidiary bases in shares of the subsidiary's stock
corporation as the number listed in Part I. and/or to the subsidiary's attributes may be
required. See Regulations sections 1.1502-19
(b)(1)(iv) (if the basis of the share is equal to or
less than zero) and 1.1502-36 (if the basis of
the share is greater than zero).
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