Short year returns for corporate acquisitions and dispositions are handled in the Compliance Assurance Process (CAP) as follows:
- Acquired Entities: If an entity is acquired and is 100% owned by the CAP taxpayer, and will be included in the consolidated return, the short year return of the acquired entity (the period before the entity was acquired) can be reviewed in the CAP environment. This is contingent on the CAP taxpayer having control over the preparation of the short period return.
- Departing Entities: For entities that are departing the consolidated group, the short period return (the period after the entity leaves the group) should not come under the purview of the CAP Memorandum of Understanding (MOU) since the departing entities are no longer under the control of the CAP taxpayer.
This approach ensures that the CAP taxpayer maintains oversight and compliance for entities within its control while recognizing the limitations once entities depart from the consolidated group.
Sources:
Rev. Proc. 2006-46
Rev. Proc. 2006-45
§ 381. Carryovers in certain corporate acquisitions
Rev. Proc. 2015-13
Rev. Proc. 2012-39
PLR 9552030
