[Code of Federal Regulations] [Title 26, Volume 13] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR] [Page 29-31] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) RELATED RULES--Table of Contents Sec. 1.1562-2 Termination of election. (a) In general. An election under section 1562(a)(1) is terminated by any one of the occurrences described in paragraph (b) of this section. For years affected by termination, see paragraph (c) of this section. (b) Methods of termination--(1) Consent of the members. An election may be terminated with respect to a particular December 31 by consent of the component members of a controlled group of corporations. A termination by consent shall be made with respect to a particular December 31 and shall be valid only if each corporation which is required to consent to the termination under paragraph (a)(1) of Sec. 1.1562-3 gives its consent in the manner and within the time prescribed in such section. A termination by consent shall not be considered as made with respect to a [[Page 30]] particular December 31 until each corporation which is required to consent to the termination under paragraph (c)(1) of Sec. 1.1562-3 files the original of a statement described in such paragraph (or, the original of a statement incorporating its consent is filed on its behalf). (2) Refusal by new member to consent. (i) If on a December 31 a controlled group of corporations which has made an election under section 1562(a)(1) includes a new member which files a statement that it does not consent to the election with respect to such December 31, then such election shall terminate with respect to such date. Such statement shall be signed by any person who is duly authorized to act on behalf of the new member, and shall be attached to the income tax return of such new member for its taxable year which includes such December 31, filed on or before the date prescribed by law (including extensions of time) for the filing of such return. The statement shall set forth the name, address, taxpayer account number, and taxable year of each corporation which was a component member of the controlled group on such December 31. In the event of a termination under this subparagraph, each component member of the controlled group on such December 31 (other than such new member) should, within 30 days after such new member files the statement of refusal to consent, file notification of the termination with the district director with whom it filed (or will file) an income tax return for its taxable year which includes such December 31. (ii) For purposes of subdivision (i) of this subparagraph, a corporation shall be considered to be a new member of a controlled group of corporations on a December 31 if such corporation: (a) Is a component member of such group on such December 31, and (b) Was not a member of such group on the January 1 immediately preceding such December 31. (3) Consolidated returns. (i) If any corporation which is a component member of a controlled group of corporations on a December 31 joins, or is required to join, in the filing of a consolidated return for its taxable year which includes such date, then an election under section 1562(a)(1) which is effective with respect to preceding taxable years of component members of the group shall terminate with respect to such December 31. In the event of a termination under this subparagraph, each component member of the controlled group on such December 31 which does not join in the filing of a consolidated return for the taxable year which includes such date, should, within 30 days after such consolidated return is filed, file notification of the termination with the district director with whom it filed (or will file) an income tax return for its taxable year which includes such December 31. (ii) The provisions of this subparagraph may be illustrated by the following example: Example. On each day of 1964 and 1965, Brown, an individual, owns all the stock of corporations M and P. Corporation P, in turn, owns all the stock of corporation S. Each corporation files a separate return for its taxable year ending on December 31, 1964. On April 30, 1965, the controlled group of corporations consisting of M, P, and S makes an election under section 1562(a)(1) with respect to December 31, 1964. On March 15, 1966, P and S join in the filing of a consolidated return for their taxable years ending December 31, 1965, and M files a separate return for its taxable year ending on such date. Under this subparagraph, the election by the controlled group with respect to December 31, 1964, is terminated with respect to December 31, 1965. On or before April 14, 1966, M should file notification of the termination with the district director with whom it filed its income tax return for 1965. (4) Controlled group no longer in existence. If a controlled group of corporations is considered as going out of existence with respect to a particular December 31 under paragraph (b) of Sec. 1.1562-5, and if there is no successor group in respect of such controlled group under the rules provided in paragraph (c) of such section, then an election under section 1562(a)(1) with respect to such controlled group shall terminate with respect to such December 31. (c) Effect of termination. A termination under subparagraph (1), (2), (3), or (4) of paragraph (b) of this section is effective with respect to the December 31 referred to in such subparagraph. An election, once terminated, is no longer [[Page 31]] effective. Thus, a termination is effective with respect to the taxable year of each component member of a controlled group of corporations which includes such December 31 and with respect to all succeeding taxable years of each corporation which is a component member of such group (or a successor group). Moreover, after a termination, the controlled group (and any successor group) may not make a new election except as provided in section 1562(d) and Sec. 1.1562-4. [T.D. 6845, 30 FR 9745, Aug. 5, 1965]