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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RELATED FAQS
  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 Answer >>
  2. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Answer >>
  3. What is the difference between a subsidiary and a wholly owned subsidiary?

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