mariemonroe Posted October 16, 2019 Share Posted October 16, 2019 Here is the fact pattern. Parent’s voting stock is owned 50/50 by John and James (unrelated). Parent owns 100% of Sub. Sub is thinking of creating Sub 1 which will be owned 50% by Sub 50% by Sub’s general manager The ultimate question is whether Parent is in a controlled group with Sub 1. I think the answer is no. I am struggling with whether Sub’s general manager’s stock in Sub 1 will be excluded under 1563(c)(2)(iii) (assuming the stock will be subject to a condition that runs in favor of Parent or Sub). This rule hinges on Parent owning 50% of Sub 1 and I don’t think it does because the parent sub rules for determining stock ownership in 1563(d)(1) only apply the constructive ownership rules from of 1563(e)(1)(options), (2)(partnerships) and (3) (estates and trusts). Link to comment Share on other sites More sharing options...
Bill Presson Posted October 16, 2019 Share Posted October 16, 2019 If the ownership of the "parent" is 50%, then I'm pretty sure it is no longer actually a "parent" because it doesn't control the voting stock of Sub 1. William C. Presson, ERPA, QPA, QKA bill.presson@gmail.com C 205.994.4070 Link to comment Share on other sites More sharing options...
Luke Bailey Posted October 17, 2019 Share Posted October 17, 2019 Controlled groups and attribution are always super tricky, but I'm not sure I understand the argument. Sub owns 50% of Sub 1, so under the assumption you make, Sub 1 and Sub are in a parent subsidiary controlled group, right? And Parent and sub are also in a controlled group? So does not the chain form a single controlled group under 1563(a)(1)(B)? Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Bill Presson Posted October 17, 2019 Share Posted October 17, 2019 15 hours ago, Luke Bailey said: Controlled groups and attribution are always super tricky, but I'm not sure I understand the argument. Sub owns 50% of Sub 1, so under the assumption you make, Sub 1 and Sub are in a parent subsidiary controlled group, right? And Parent and sub are also in a controlled group? So does not the chain form a single controlled group under 1563(a)(1)(B)? 50% ownership doesn't constitute a parent subsidiary controlled group. William C. Presson, ERPA, QPA, QKA bill.presson@gmail.com C 205.994.4070 Link to comment Share on other sites More sharing options...
Luke Bailey Posted October 17, 2019 Share Posted October 17, 2019 1 hour ago, Bill Presson said: 50% ownership doesn't constitute a parent subsidiary controlled group. Roger that, Bill. But my point was that in the OP, Parent owns 100% of Sub (cg there), and then, if the manager's stock is excluded, Sub owns 100% of Sub 1. So even if the attribution rules only give Parent 50% of Sub 1, you have a chain of 100% from Parent to Sub, and Sub to Sub 1. Bill Presson 1 Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now