Can spouse of more than 2% owner of s-corp participate in cafeteria plan? Spouse is an employee of the corp.

[Guest kamp]

Can the spouse of a more than 2% owner of an s-corp participate in a cafeteria plan? the spouse is an employee of the corp.

[Guest JerseyGirl]

No, due to the ownership attribution rules in Code Section 318, the spouse, children, grandchildren and parents of a 2% owner of an S-corp are all excluded from participating in the companies cafeteria plan, even if they are employees.

[Guest b2kates]

Said another way the spouse of a 2% shareholder is also deemed to be a 2%shareholder by stock attribution under Section 318 of the Internal Revenue code.