Rule: IRC Sections 1501 and 1504 allow certain combinations of corporations (an affiliated group) to file a consolidated income tax return. An affiliated group is one or more chains of corporations connected through stock ownership with a common parent if that parent directly owns stock possessing at least 80% of the total voting power of at least one of the other corporations and having a value equal to at least 80% of the total value of the stock of the corporation. Choice "D" is correct. Since Silver owns 85% of the voting stock and fair market value of Gold, they can file a consolidated return.
Choice "c" is incorrect. A consolidated return, not two separate returns, is appropriate with the 85% ownership.
Choice "a" is incorrect. A consolidated return, not two separate returns, is appropriate with the 85% ownership. The timing of the merger has nothing to do with the decision.
Choice "b" is incorrect. A consolidated return is appropriate with the 85% ownership. The timing of the merger has nothing to do with the decision.