Control Group

[Guest MNR]

Is the following situation a controlled group or not?

Two companies: A and B. B is a subsidiary, wholly owned, by A.

two sets of parents where each set owns .20% and 23.08%.

There 14 children, all above 21 yeard of age except for one. Each sonn/daughter owns about 6%.

Any help would be greatly appreciated.

[R. Butler]

If A owns 100% of stock in B then you have a parent/subsidiary controlled group.

[Guest MNR]

Thanks for your reply R. Butler. Are there any attributiion rules that I should be aware of that perhaps will change the result of your answer?

[R. Butler]

The controlled group rules are found in IRC §§414(B), 414© and 1563.

In your example you state that B is a wholly owned subsidiary of A. That is a controlled group. The ownership of A is irrelevant to that determination.

It appears to me you are trying to analyze your situation using rules applicable to brother/sister groups, but again according to your fact pattern you have a parent/subsidiary relationship.

[Guest MNR]

R. Butler. Under attribution rules for controlled groups, it never exists based on family status between siblings. Also, parents are deemed to own the stock of his/her adult(over 21) only if the parent(s) already own, or is deemed to own more than half of the company. In my example, all of this applies. Do you agree?

Anyone else agrees or disagrees?

[R. Butler]

I might not understand your question. I don't see an attribution issue in your scenario. Attribution is used to treat a person as owning an interest that they don't actually own. You have stated that A actually owns B. You don't have to attribute ownership of B to the individual shareholders of A, A owns more than 80% of B; that is a controlled group.

Again, I might not understand the question, but it appears that you may be over analyzing this. In your fact pattern Company A owns 100% of Company B; that is a parent/subsidiary controlled group. See §1.414©-2(B).

I hope this helps.

[E as in ERISA]

I agree with R. Butler. If A owns 100% of B, you don't look at the ownership of A. The interests of the individuals only come into play if there is another company, Z, in which the individuals own interests and you are trying to determine if Z is part of the group as a brother-sister.

If A and B are subchapter C corporations, ask the accountant if they are filing a consolidated return or sharing tax attributes for filing purposes. That should help confirm the answer. If they are flow-through entities, then that analysis will not answer your question.

[Guest MNR]

So what you are saying is that even by taking company A alone, and the parents ownig only about 25%, and the children, each one owning an average of 5.5% and over 21, the attribution rules for controlled gruops and the fact that the parent don't own more than 50%, do not apply?

[R. Butler]

If your question is whether Co. A and Co. B are a controlled group and you are further saying Co. A owns 100% of Co. B, then yes I am saying that individual ownership of Co. A, as well as the relationship and age of Co. A's shareholders, is irrelevant.

[Blinky the 3-eyed Fish]

R. Butler, are you saying this may be a controlled group?

[R. Butler]

You didn't blink in this post Blinky. Really I just figured if I can repost the same response 5 or 6 times I can keep my numbers up and hopefully one day become the top poster.

[Blinky the 3-eyed Fish]

You will have to outlive pax and Tom Poje by about 50 years. Good luck on your mission.

[Guest MNR]

Blinky, are you not sure if this is a controlled group? or do you agree with R. Butler?

[Blinky the 3-eyed Fish]

MNR, this is ABSOLUTELY a controlled group. There is no question. There is no doubt. Let's pretend R. Butler is God (he's not, but I am just pretending) and His Word on this matter is Gospel.

[Guest MNR]

Thanks. why do you say that? who is he?

[Blinky the 3-eyed Fish]

Who is who?

[Guest MNR]

The Butler, of course!!