Attribution Question

[R. Butler]

Company Z owns 72% of Company A.

Wife owns 3.75% of Company A.

Husband owns .03% of Company A, 1% of of Company Z.

Kids owns 99% of Company Z, but no direct ownership in Company A.

The kids are attributed 71.28% of Company A (72%*99%), is this ownership further attirbuted to Parents. I'm thinking that this is not considered double attribution, but I'm not positive.

I'm trying to determine HCE status.

[jaemmons]

I assume each of the children owns at least 5% of Company Z. If that is the case, then they would be proportionately attributed the stock that Company Z owns of Company A. Any child who would be proportionately attributed more than 5% of Company A would become an HCE of Company A.

There is no double attribution of the children stock from the corporation to their parents, so both parents are attributed the stock from each child and each child is attributed 3.78% from the parents.

Depending on the individual ownership of each child, in the least, the parents would become 5% owners for HCE determination.

[Blinky the 3-eyed Fish]

In looking at the 318 attribution rules, I think the following is true:

A person is attributed the shares of a corporation for determining HCE status if they own 5% of the corporation or more (416(i)(B)(iii). Unless there are roughly 15 kids and they live in a shoe, I think the kids own more than 5% of A.

Double attribution simply relates to attribution by family members and not to the above situation (318(a)(5)(B). So, looks as if you have yourself a bunch of HCE's, as the kids' ownership is attributed to the parents.

Darn, jaemmons beat me to the answer.

[R. Butler]

Thanks.