Controlled Group

[Guest mcw]

X corp is owned equally by 25 shareholders. Y LLC is owned equally by the same 25 shareholders. The way I read the regs this is not a controlled group. However, if X owned 100% of y, it would be a controlled group. Am I missing something? I would like for the first example to be a controlled group so I can file a 5307 instead of a 5300. If I get a letter for both companies, the user fee is $700 for the 5300 as compared to $125 for the 5307. Any thoughts?

[Archimage]

I agree with your assessment based on the information provided. It is not a controlled group.

[E as in ERISA]

I also agree -- unless voting power is different than ownership percentages.

Look at it this way: It is assumed that there is not a small influential group that has enough power to make the same decisions for both companies. The votes are scattered enough that the decisions could easily be different. Therefore, they aren't forced to make similar decisions for both companies.

If X owned 100% of Y, then it would be assumed that the governing body of X would be influential in both decisions. So the answer is different.

[Guest jashendo]

There is no controlled group in your example without additional facts, e.g., shareholders/members are related so that one's ownership would be attributed to another to a sufficient degree that you would meet the brother/sister tests. For example, if the 25 equal shareholders were in fact 5 families of 5 members each (or family trusts, or other attribution entities), then after attribution you would have five 20% owners, and a brother/sister controlled group.

[Guest mcw]

Thanks for your input. No relationship between the shareholders so no attribution.