Example 1. The taxpayer, incorporated August 1, 1982, reports on a calendar year basis. Its net income for the period August 1 through December 31, 1982 (153 days) was $20,000. Its net income for 1983 was $50,000 and for 1984, $70,000. Average net income for 1984 would be $57,870 ($140,000 ÷ 2153/365).
Example 2. The taxpayer filed on a calendar year basis until December 1980. In 1981 it changed its filing period to a fiscal year ending June 30. In order to do so, it filed a short period report for January 1 through June 30, 1981. Thereafter, taxpayer continued to file on a fiscal year basis. In computing average net income for the period ending June 30, 1985, taxpayer would include its January 1 through June 30, 1981 net income or loss as well as its July 1, 1981 through June 30, 1985 net income or loss and divide the result by 4 181/365.
Example 3. The taxpayer, incorporated May 1, 1971, filed a calendar year report for 1980. Between January 1, 1981 and December 31, 1984, the taxpayer, as a result of various mergers and filing period changes, had 6 book years. The taxpayer's average net income for 1984 would include the net income or loss for each of the 6 book years between January 1, 1980 and December 31, 1984, divided by five.
Example 1. Effective December 31, 1984, Corporation A merges into Corporation B. The net income or loss for the two corporations are:
Year | Corporation A | Corporation B |
1981 | $60,000 | $150,000 |
1982 | $10,000 | $100,000 |
1983 | ($100,000) | $ 80,000 |
1984 | ($100,000) | $ 60,000 |
Total 1985 | - | $100,000 |
The average net income for 1985 for Corporation B, the corporation which survived the merger, would be $98,000 ($490,000 ÷ 5), determined without regard to the net income or loss of Corporation A prior to the merger.
Example 2. Effective December 31, 1984, Corporation A and Corporation B consolidate to form a new corporation, Corporation C. Both Corporations A and B had been in existence for more than 5 years prior to the consolidation. Corporation C's average net income would be determined for 1985 based only on the corporation's net income or loss for 1985, and no recognition would be given to the net income or loss of either Corporation A or Corporation B prior to the consolidation.
Example 3. Effective December 31, 1984, Corporation A, formerly incorporated in State Y, reincorporates in State X. The average net income for 1985 would be computed taking into account net income or loss for 1985, as well as net income or loss for the 4 years prior to January 1, 1985.
61 Pa. Code § 155.26
The provisions of this § 155.26 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).
This section cited in 61 Pa. Code § 155.21 (relating to general).