IRS Rules Two Professional Corporations Can Join Consolidated Group

In a private letter ruling (PLR 201451009) released in December 2014, the IRS ruled two professional corporations owned by an individual could join a consolidated group of corporations.

The taxpayer was a parent-subsidiary consolidated group. An individual held legal title to two brother-sister professional corporations. The subsidiary and individual entered into several agreements that effectively provided that the individual could take no corporate voting governance actions, and in the event of noncompliance or certain other actions, the individual had to transfer legal title to another subsidiary-designated individual.

Additionally, in the event of a liquidation, the individual was deemed to first transfer ownership of the professional corporation to the subsidiary for nominal consideration, followed by the liquidation or merger of the professional corporation with and into the subsidiary.