Affiliated Group


DEFINITION of 'Affiliated Group'

Two or more corporations that are related through common ownership, but are treated as one for federal income tax purposes. An affiliated group consists of a parent corporation and one or more subsidiary corporations. The parent corporation must own at least 80% of its subsidiary's stock and consolidates the subsidiaries financial statements with its own.

BREAKING DOWN 'Affiliated Group'

Affiliated groups are required to file consolidated tax returns. A disadvantage of the affiliated group designation is that it prevents larger companies from splitting into smaller ones for the purposes of allocating more of their income to lower tax brackets or avoiding the alternative minimum tax. An advantage is that companies within the group can use their ordinary losses to offset each other's ordinary income.

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  1. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Full Answer >>
  2. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  3. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  4. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  5. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  6. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>

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