26 C.F.R. § 1.1502-12

Separate taxable income

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The separate taxable income of a member (including a case in which deductions exceed gross income) is computed in accordance with the provisions of the Code covering the determination of taxable income of separate corporations, subject to the following modifications:

(a) Transactions between members and transactions with respect to stock, bonds, or other obligations of members shall be reflected according to the provisions of § 1.1502-13;

(b) Any deduction that is disallowed under § 1.1502-15 must be taken into account as provided in that section.

(c) The limitation on deductions provided in section 615(c) or section 617(h) shall be taken into account as provided in § 1.1502-16;

(d) The method of accounting under which such computation is made and the adjustments to be made because of any change in method of accounting shall be determined under § 1.1502-17;

(e) [Reserved]

(f) Any amount included in income under § 1.1502-19 shall be taken into account;

(g) [Reserved]

(h) No net operating loss deduction shall be taken into account;

(i) [Reserved]

(j) No capital gains or losses shall be taken into account;

(k) No gains and losses subject to section 1231 shall be taken into account;

(l) No deduction under section 170 with respect to charitable contributions shall be taken into account;

(m) [Reserved]

(n) No deduction under section 243(a)(1) or section 245 (relating to deductions with respect to dividends received) is taken into account;

(o) Basis shall be determined under §§ 1.1502-31 and 1.1502-32, and earnings and profits shall be determined under § 1.1502-33; and

(p) The limitation on deductions provided in section 613A shall be taken into account for each member's oil and gas properties as provided in § 1.1502-44.

(q) [Reserved]

(r) See §§ 1.337(d)-2, 1.1502-35, and 1.1502-36 for rules relating to basis adjustments and allowance of stock loss on dispositions or transfers of subsidiary stock.

(s) See § 1.1502-51 for rules relating to the computation of a member's GILTI inclusion amount under section 951A and related basis adjustments.

(t) See § 1.1502-50 for rules relating to the computation of a member's deduction under section 250.

(Secs. 1502 and 7805 of the Internal Revenue Code of 1954 (68A Stat. 637; 917; 26 U.S.C. 1502, 7805)) [T.D. 6894, 31 FR 11794, Sept. 8, 1966] Editorial Note:For Federal Register citations affecting § 1.1502-12, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.govinfo.gov.

Notes of Decisions

Cited in 17 cases, 1962–2016 · leading case: Norwest Corp. v. Comm'r, 111 T.C. 105 (Tax Ct. 1998).

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Norwest Corp. v. Comm'r, 111 T.C. 105 (Tax Ct. 1998). · cites it 6× “1502-12 ", of each member of the group. Finally, section 1.1502-12, Income Tax Regs.”

Intermet Corp. & Subsidiaries v. Comm'r, 111 T.C. 294 (Tax Ct. 1998). · cites it 42× “1502-21A(f), Income Tax Regs. , and L had separate taxable income as defined in sec.”

Bennett Paper Corp. & Subsidiaries v. Comm'r, 78 T.C. 458 (Tax Ct. 1982). · cites it 4× “, provides that the "consolidated return year shall be determined by taking into account -- (1) the separate taxable income of each member of the group (see section 1.1502-12 for the computation of separate taxable income).”

Guidant LLC v. Comm'r, 146 T.C. No. 5 (Tax Ct. 2016). · cites it 4× “Instead, STI *33 serves as a recapitulation of each member's taxable items in accordance with the provisions of the Code, as possibly adjusted to reflect certain modifications and exclusions.”

Cent. & S. Companies, Inc. v. Weiss, 3 S.W.3d 294 (Ark. 1999). · cites it 2× “26 CFR § 1.1502-12 (1999). While the state regulation is consistent with the federal regulation for net operating losses, the Department disregards the federal regulation as it applies to deductions for charitable contributions.”

Hamilton Indus., Inc. v. Comm'r, 97 T.C. 120 (Tax Ct. 1991). · cites it 2× “Some items are figured at the consolidated group level, but the depreciation allowance is not one of them.”

Landy Towel & Linen Serv., Inc. v. Comm'r, 38 T.C. 296 (Tax Ct. 1962). · cites it 6× “The subsidiaries did not file the authorization and consent forms, Form 1122, as required by section 1.”

New York Frozen Foods, Inc. v. Bedford Hts. Income Tax Bd. of Rev. (Slip Opinion), 2016 Ohio 7582 (Ohio 2016). “1502-28; 26 C.F.R. 1.1502-12(a) (the “separate taxable income” of each member of the group, which will be aggregated for the entire group under 1.”

State Farm Mut. Auto. Ins. Co. v. Comm'r, 130 T.C. 263 (Tax Ct. 2008). · cites it 4× “To calculate CTI, each member computes its separate taxable income, subject to certain modifications listed in section 1.1502-12, Income Tax Regs.”

S. California Sav. & Loan Ass'n v. Comm'r, 95 T.C. 35 (Tax Ct. 1990). · cites it 4× “, expressly defers to appropriate statutory sections in connection with the computation of taxable income.”

First Nat'l Bank v. Comm'r, 83 T.C. 202 (Tax Ct. 1984). · cites it 2× “The separate taxable income of each member is computed as if the member were a separate corporation and then certain modifications are made for intercompany transactions and other items.”

United States v. Manor Care, Inc., 490 F. Supp. 355 (D. Maryland 1980). “Manor points out, however, that there are exceptions to these general rules for computing the consolidated income tax, see 26 CFR § 1.1502-12 , and suggests that the purpose of these exceptions is to facilitate computation of the actual income of the “business unit” in question,…”

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— 26 C.F.R. § 1.1502-12(a) — 1 case

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