Fillable Form IRS 851

What is Form 851?

Form 851, Affiliations Schedule, is a form that is used by the parent corporation of an affiliated group to identify the parent corporation, each member of the affiliated group, report the overpayment credits, estimated tax payments, and tax deposits attributable to each corporation in the affiliated group, and to determine that each of the subsidiary corporations qualifies as a member of the affiliated group.

An Affiliated Group is defined as a group of two or more corporations that are related through common ownership, and are treated as one corporation for the purpose of federal income tax. An affiliated group consists of a parent corporation and one or more subsidiary corporations. The parent corporation must own at least 80% of the subsidiary corporation’s stock, and include their subsidiaries’ financial statements with their own through the use of forms like Form 851.

Corporations form affiliated groups for various reasons, but a common one is to be able to make use of each corporation’s ordinary losses to offset the entire group’s ordinary income. While being in an affiliated group keeps 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, being designated as an affiliated group means that if one of the subsidiary corporations is not successful in its business, its losses can be used to reduce the tax burden of the others in the group.

Who needs to use Form 851?

Form 851 is filed by the parent corporation of an affiliated group in order to declare their financial statements and tax returns alongside their subsidiary corporations’. It is submitted alongside the consolidated income tax return of the entire affiliated group.

Parent corporations also make use of Form 851 to report any changes in stocks for them or their subsidiaries’, and to report any outstanding class or classes of stocks of either the parent or subsidiary corporations.

How to fill out Form 851?

Form 851 is a very long form, but is ultimately quite simple to fill out. Make sure to have the necessary documents detailing the financial reports of both the parent company and its subsidiaries in order to ensure that all information you entered is correct and updated.

There are also instructions on Page 4 of Form 851 that explain particular steps. Make sure to consult the instructions often to ensure that you are entering the correct information.

Tax year

Enter the tax year that you are filing Form 851 for in the space provided.

Name of Parent Corporation

Enter the full name of the parent corporation here.

Employer Identification Number

Enter the parent corporation’s employer identification number here.

Number, Street, and Room or Suite Number.

Enter the number, street, and room or suite number of the parent corporation’s main office here. If the post office does not deliver mail to the street address, and the corporation has a P.O. box, enter the P.O. box number instead.

City or Town, State, and ZIP Code

Enter the city or town, state, and zip code of the parent corporation.

Part I - Overpayment Credits, Estimated Tax Payments, and Tax Deposits

Parent Corporation - Portion of Overpayment Credits and Tax Payments

Enter the sum of the amount of overpayments of tax from the prior tax year that the parent corporation chose to credit to this year’s tax, and the estimated tax payments made by the parent corporation.

Note that this total must be the same as the total written on the lines for overpayments and estimated tax payments on the consolidated tax return.

Parent Corporation - Tax Deposited with Form 7004

Enter the amount of tax deposited by the common parent corporation with Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, that is applicable to each corporation in the affiliated group.

The total must be the same as the amount entered in the “Tax deposited with Form 7004” line on the consolidated tax return.

Subsidiary Corporation/s

Enter the following information in the necessary column for each subsidiary corporation in the affiliated group. You may use additional sheets of paper as needed.

Employer Identification Number

Enter the employer identification number of the subsidiary corporation here.

Portion of Overpayment Credits and Tax Payments

Enter the sum of the amount of overpayments of tax from the prior tax year that the subsidiary corporation chose to credit to this year’s tax, and the estimated tax payments made by the subsidiary corporation.

Note that this total must be the same as the total written on the corresponding lines for overpayments and estimated tax payments on the consolidated tax return.

Tax Deposited with Form 7004

Enter the amount of tax deposited by the common parent corporation with Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, that is applicable to each corporation in the affiliated group.

The total must be the same as the amount entered in the “Tax deposited with Form 7004” line on the consolidated tax return.

Part II - Principal Business Activity, Voting Stock Information, Etc.

Important note: For Parts II, III, and IV, use the same number for the common parent corporation and for each subsidiary corporation as listed in Part I.

Parent Corporation - Principal Business Activity

Enter the parent corporation’s Principal Business Activity (PBA) here.

Parent Corporation - PBA Code No.

Enter the parent corporation’s PBA code number.

Subsidiary Corporation/s

Enter the following information in the necessary column for each subsidiary corporation in the affiliated group. You may use additional sheets of paper as needed.

Principal Business Activity

Enter the subsidiary corporation’s PBA here.

PBA Code No.

Enter the PBA code number of the subsidiary corporation here.

Nondividend Distributions

Check “Yes” if the subsidiary company has made any nondividend distributions. Otherwise, check “No”.

Stock Holdings at the Beginning of the Year

Number of Shares

Enter the number of shares held by the corporation at the beginning of the year.

Percentage of Voting Power

Enter the percentage of voting power held by the corporation.

Percentage of Value

Enter the percentage of value held by the corporation.

Owned by Corporation No.

Enter the number of the corporation that owns the stocks.

Part III - Change in Stock Holdings During the Tax Year

Enter the following information for each change in stock holdings that occurred throughout the tax year. Use additional sheets as needed.

Corporation No.

Enter the corporation number here.

Name of Corporation

Enter the name of the concerned corporation here.

Shareholder of Corporation No.

Enter the number of the corporation that the above corporation is a shareholder of.

Date of Transaction

Enter the date when the transaction of shares was held.

Column A - Changes

Number of Shares Acquired

Enter the number of shares acquired by the corporation.

Number of Shares Disposed of

Enter the number of shares disposed of by the corporation.

Column B - Shares Held after Changes Described in Column A

Percentage of Voting Power

Enter the percentage of voting power held by the corporation after the change in amount of shares.

Percentage of Value

Enter the percentage of value of the corporation after the change in amount of shares.

Question C - Share Basis at Time of Transfer

If any of the transactions listed above caused a transfer of a share of subsidiary stock, and the share’s basis exceeded its value at the time of the transfer, check “yes”. Otherwise, check “no”. Consult the instructions for Part III, Question C on page 4 for more information.

Question D - Subsidiary Stock Worth

If any share of the subsidiary stock became worthless during the tax year (as defined by Section 165 of the U.S. Code), check “yes”. Otherwise, check “no”. Consult the instructions for Part III, Question D on page 4 for more information.

Item E - Holders of Capital Stock

If the equitable owners of any capital stock shown above were other than the holders of record, provide details of the changes in the space provided. You may use additional sheets of paper as needed.

Item F - Additional Stock Issued or Retired

If any additional stock was issued or retired during the last year, enter the details of those transactions in the space provided. You may use additional sheets of paper as needed.

Part IV - Additional Stock Information

Question 1 - Outstanding Class of Stock

If a corporation had more than one class of stock outstanding, check “yes”. Otherwise, check “no”.

If you checked “yes”, enter the following information in the table provided. Enter this information for each corporation and outstanding class of stock. Use additional sheets of paper as needed.

Corporation Number

Enter the number of the corporation that owns the outstanding class or classes of stock.

Name of the Corporation

Enter the name of the corporation that owns the outstanding class or classes of stock.

Class of Stock

Enter the class of stock, and a short description of it, here.

Question 2 - Re-affiliation of Consolidated Group Members

If a member of the consolidated group was re-affiliated within 60 months of dis-affiliation, check “yes”. Otherwise, check “no”.

If you checked “yes”, enter the following information in the table provided. Enter this information for each corporation that was re-affiliated. Use additional sheets of paper as needed.

Corporation Number

Enter the number of the corporation that was re-affiliated.

Name of the Corporation

Enter the name of the corporation that was re-affiliated.

Explanation

Explain the circumstances behind the corporation’s dis-affiliation and subsequent re-affiliation.

Question 3 - Stock Acquisition Arrangements

If there was any arrangement by which one or more persons outside the affiliated group could acquire any stock or acquire voting power without acquiring stock in the corporation other than a de minimis amount from a corporation or another member of the affiliated group, check “yes”. Otherwise, check “no”.

If you checked “yes”, enter the following information for each corporation involved in the table below. Use additional sheets of paper as needed.

Corporation Number

Enter the number of the corporation here.

Name of Corporation

Enter the name of the corporation here.

Column A - Percentage of Value

Enter the percentage of the value of the outstanding stock that the person(s) could acquire.

Column B - Percentage of Outstanding Voting Stock

If the arrangement was associated with voting stock, enter the percentage of outstanding voting stock that the person(s) could acquire.

Column C - Percentage of Voting Power

If the arrangement involved the acquisition of voting power without acquiring the related stock, enter the percentage of voting power that the person(s) could acquire.

Column D - Description of Arrangement

Enter a brief description of the arrangement that allowed a person who was not a member of the affiliated group to acquire any stock or voting power.

Tips when filling out Form 851

Because Form 851 involves the financial information of several corporations, it is important to make sure that the correct and updated information is entered in order to avoid any problems. The form also contains possibly sensitive information regarding taxes and stocks, and so it is important that the form be kept in a safe place and submitted properly.

Ensure that all information entered is updated and correct. Due to the length of the form, it would benefit you to double-check the information you enter in order to make sure that everything is in order. This will help you avoid any issues regarding the proper reporting of taxes and changes in stocks.

Practice good contract management. Make a copy of the fulfilled form and keep it in a safe and organized place for backup or future legal purposes.