A more thorough explanation:

Definition: An affiliated group is a chain of corporations that have at least 80% ownership by other corporations in the group. This ownership structure allows the group to elect to file a consolidated tax return.

Example: Company A owns 100% of Company B and Company C. Company B owns 80% of Company D. Company C owns 70% of Company E. These companies form an affiliated group because they are all connected through ownership. They can choose to file a consolidated tax return, which combines the income and deductions of all the companies in the group.

Explanation: The example illustrates how an affiliated group is formed through ownership. Company A owns all of Company B and Company C, and they, in turn, own parts of other companies in the group. This ownership structure allows the group to file a consolidated tax return, which can simplify the tax process and potentially lower their tax liability.