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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