What does a consolidated tax return allow corporations to do?

A consolidated tax return enables affiliated corporations to be treated as a single entity for tax purposes. This approach allows the group of corporations to combine their financial results, which can lead to a more favorable overall tax outcome. By filing a consolidated return, corporations can offset profits from one entity with losses from another within the same group, effectively reducing the overall tax liability. This approach also simplifies tax compliance by allowing the group to report income, deductions, and credits collectively.

The other options do not accurately reflect the benefits of a consolidated tax return. Filing separate tax returns for each entity contradicts the purpose of consolidation. Exempting certain income from taxation is not a function unique to consolidated returns but rather relates to specific tax rules and provisions applicable to all corporations. Reporting losses from only one entity does not utilize the consolidated return's benefit of allowing intercompany offsets, which is a central feature of filing as a consolidated group.