Consolidated capital stock tax returns;

              Bulletin HASKINS & SELLS 57
Consolidated Capital Stock Tax Returns
R E P R E S E N T A T I V E S of the Treasury
Department at Washington, in passing
on a case recently, wherein separate capital
stock tax returns had been filed for the
respective companies in a certain group,
basing the values on an apportionment of
the market value of the stock of the
parent company, objected to such proced­ure
but made clear the present position of
the department in such cases substantially
as follows:
1. That separate capital stock tax re­turns
will be required for each company,
regardless of affiliations;
2. That only in rare and exceptional
cases will the use of a consolidated report
as a basis for arriving at the values of
separate companies be permitted;
3. That the parent company will be
taxed on the market value of its stock if
there is a market, or on the book value or
capitalized earnings if there is no market;
4. That the subsidiaries will be taxed
on the book value of their stock;
5. That the department will not at­tempt
to tax both the parent company and
the subsidiary companies on their capital­ized
earnings, admitting that such taxation
would be unjust;
6. That the question of consolidated
returns, and separate returns based on a
consolidated report has been discussed
thoroughly by the department in many
other instances during the last year and
that the position of the department has
been uniform in permitting no consolida­tions
and no separate reports based on a
consolidation;
7. That the Solicitor for the Treasury
Department has furnished an opinion in
this matter and in such opinion has stated
that the law will not permit the use of a
consolidated return nor a return based on
a consolidated report, that he will not
countenance any administrative attempt to
permit such reports, and that the taxation
of the parent company and the subsidiary
companies, as separate entities, is not
double taxation.
8. That it is not the intention of the
department to amend the regulations so as
to permit consolidated returns but on the
contrary to so amend them as to prevent
any possibility of such returns being filed.
In view of the above it appears that if a
corporation having subsidiaries desires re­lief
in such cases from what amounts to
double taxation, it will be necessary to
bring suit for the recovery of any tax levied
under this ruling.