A is corrent. The election to file consolidated returns is limited to affiliated corporations. Affiliated corporations are parent-subsidiary corporations that are connected through stock ownership wherein at least 80% of the combined voting power and value of all stock (except the common parent’s) is directly owned by other includable corporations. Brother-sister corporations are not affiliated corporations. Therefore, this answer is correct.
B is incorrect because an affiliated group’s election to file consolidated returns is independent of its issuing financial statements on a consolidated basis. Refer to the correct answer explanation.
C is incorrect because brother-sister corporations are not affiliated corporations, and therefore, they may not file a consolidated return. Refer to the correct answer explanation.
D is incorrect because no advance permission is required. Refer to the correct answer explanation.
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