Form 851 (Rev. 10-2016)
Section references are to the Internal Revenue
Code unless otherwise noted.
For the latest information about developments
related to Form 851 and its instructions, such
as legislation enacted after they were
published, go to www.irs.gov/form851.
Purpose of Form
Use Form 851 to:
1. Identify the common parent corporation
and each member of the affiliated group;
2. Report the amount of overpayment
credits, estimated tax payments, and tax
deposits attributable to each corporation; and
3. Determine that each subsidiary
corporation qualifies as a member of the
Who Must File
The parent corporation must file Form 851 for
itself and for corporations in the affiliated
group. File Form 851 by attaching it to the
consolidated tax return for the group.
An affiliated group is one or more chains of
includible corporations connected through
stock ownership with a common parent
corporation. See sections 1504(a) and (b). The
common parent must be an includible
corporation and the following requirements
must be met.
1. The common parent must own directly
stock that represents at least 80% of the total
voting power and at least 80% of the total
value of the stock of at least one of the other
2. Stock that represents at least 80% of
the total voting power, and at least 80% of
the total value of the stock of each of the
other corporations (except for the common
parent) must be owned directly by one or
more of the other includible corporations.
For this purpose, the term “stock” generally
doesn't include any stock that:
1. Is nonvoting,
2. Is nonconvertible,
3. Is limited and preferred as to dividends
and doesn't participate significantly in
corporate growth, and
4. Has redemption and liquidation rights
that don't exceed the issue price of the stock
(except for a reasonable redemption or
Include the suite, room, or other unit number
after the street address. If the post office
does not deliver mail to the street address
and the corporation has a P.O. box, show the
box number instead.
When listing information in Parts II, III, and IV,
use the same number for the common parent
corporation and for each subsidiary
corporation as the number listed in Part I.
Portion of overpayment credits and
estimated tax payments. Enter for the
common parent corporation and for each
subsidiary corporation the amount of:
• Overpayments of tax from the prior tax year
that each corporation elected to credit to the
current year's tax, and
• Estimated tax payments made by each
The total must be the same as the amounts
entered on the lines for overpayments and
estimated tax payments on the consolidated
income tax return.
Tax deposited with Form 7004. Enter for the
common parent the tax deposited with Form
7004, Application for Automatic Extension of
Time To File Certain Business Income Tax,
Information, and Other Returns, that is
attributable to each corporation. The total
must be the same as the amount entered on
the “Tax deposited with Form 7004” line on
the consolidated income tax return.
Principal business activity (PBA) and PBA
Code No. Enter the PBA and the PBA code
number for the common parent corporation
and for each subsidiary corporation. Use the
activity for the specific industry group from
which the largest percentage of each
corporation's total receipts is based.
A list of the PBAs and code numbers is
located in the Instructions for Form 1120.
Nondividend distributions. Nondividend
distributions are any distributions (other than
stock dividends and distributions in exchange
for stock) made to shareholders during the
tax year for which the consolidated tax return
is filed that were in excess of the
corporation's current and accumulated
earnings and profits. See sections 301 and
316 and Form 5452, Corporate Report of
Question (c). For this purpose, the term
“transfer” includes transactions in which (1) a
shareholder-member ceases to own a share
of subsidiary stock in a transaction in which
the shareholder-member recognizes income,
gain, deduction, or loss on the stock; (2) a
shareholder-member and the subsidiary
cease to be members of the same
consolidated group; and (3) a nonmember
acquires the share from a member. If any type
of transfer occurs and the share's basis would
otherwise exceed its value at the time of the
transfer, certain adjustments to members'
bases in shares of the subsidiary's stock and
to the subsidiary's attributes may be required.
See Regulations section 1.1502-36.
Question (d). If a share of subsidiary stock
becomes worthless within the meaning of
section 165 (taking into account the
provisions of Regulations section
1.1502-80(c)) during the group's taxable year,
certain adjustments to shareholder-members'
bases in shares of the subsidiary's stock
and/or to the subsidiary's attributes may be
required. See Regulations sections 1.1502-19
(b)(1)(iv) (if the basis of the share is equal to or
less than zero) and 1.1502-36 (if the basis of
the share is greater than zero).
Item (e). The term “equitable owners” of
stock means those that essentially have all
the rights to enjoy the benefits of stock
ownership without actually holding the stock,
for example, beneficiaries of a trust.
Question 1. For purposes of question 1 only,
disregard certain preferred stock as described
in section 1504(a)(4).
Question 3. The term “arrangement”
includes, but is not limited to, phantom stock,
stock appreciation rights, an option, warrant,
conversion feature, or similar arrangements.
Item 3a. Show the percentage of the value of
the outstanding stock that the person(s) could
Item 3b. If the arrangement was associated
with voting stock, show the percentage of
outstanding voting stock that the person(s)
Item 3c. If the arrangement was associated
with the acquisition of voting power without
the acquisition of the related stock, show the
percentage of voting power that the person(s)
Item 3d. Give a brief description of any
arrangement (defined above) by which a
person that is not a member of the affiliated
group could acquire any stock, or acquire any
voting power without acquiring stock, in the
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