The Cardinal Group had filed on a consolidated basis for several years with its wholly owned subsidiary, Swallow, Inc. The group used a calendar tax year.

On January 25, 2014, Heron acquired all of the stock of Cardinal, including its ownership in Swallow, an important supplier for Heron's manufacturing process. All parties in the new group intended to file on a consolidated basis immediately and, indeed, used consolidated amounts in filing the 2014 Heron Group return on September 10, 2015.

During the audit of Heron Group's 2014 tax return, the IRS disallowed the use of the consolidated method because no Forms 1122 had ever been filed for the affiliates in the new group. In a memo for the tax research file, summarize the possibilities for the Heron Group to be granted an extension to elect consolidated return status.