Controlled Group - Spouse Attribution

[ERISA13]

I’m trying to get a better understanding of controlled groups. This should be a straightforward situation that I think I’ve made too complicated and confused myself. I’m trying to determine if a controlled group exists in the following situation:

Company A Company B

Owner 1 50% 33.33%

Owner 2 50% 33.33%

Owner 3 0% 33.33%

-Owner 1 spouse is an employee of Company A

-Owner 2 spouse is an employee of Company A

-Not a community property state

Based on the amounts above, the common control in Company B is less than 80% (66.66%) so no controlled group. But I’m getting confused on the attribution (if any) to the spouses. I know the spousal non-involvement exception does not apply since they are employees so would the calculation look like this?

Company A Company B

Owner 1 50% 33.33%

Owner 2 50% 33.33%

Owner 3 0% 33.33%

Owner 1 Spouse 50% 33.33%

Owner 2 Spouse 50% 33.33%

If so, would common control in A now be 200% and 133.33% in B resulting in a controlled group?

[Lou S.]

First situation for CG. So no CG. You add the % owned by each together and treat them as a single person.

Second situation for determining HCE-Key status.

[ERISA13]

Thanks for the reply Lou! So in my example above, there would not be any attribution to the spouses for CG purposes since neither spouse has direct ownership?

But if the ownership for Owner 1 and his spouse had been:

Company A

Owner 1 40%

Owner 1 Spouse 20%

Then, after attribution, Owner 1 would own 60% (his 40% + wife 20%) and the wife would also be deemed to own 60% (her 20% + husband 40%) for CG purposes.

Is that correct?

[Calavera]

Owner1 would own 60% and the wife would own 60%. But you don't add them for CG purposes (no double counting). You use either one of them. My approach was to consolidate ownership percentage for one spouse, and completely disregard another spouse for CG determination purposes. In this case you will have

Company A Company B

Owner 1 100% 66.67%

Owner 3 0% 33.33%