hce or nhce?

[Lori H]

daughter of an owner is classified as an HCE. her husband, who makes less than 90K and has no ownership, is he classified as an HCE for adp test purposes? imo he is not.

[rcline46]

Family aggravation is gone. So unless the daughter owners more than 5% on her own, he is determined to be or not to be an HCE on his own merits.

[david rigby]

Family aggravation is gone.

Not in my house!

[Lori H]

ok, now i'm even more confused. I'm aware family aggregation does not apply, what about family attribution? if the owner is the father, he is an hce as well as his wife, his children(in this case his daughter), his grandchildren, his parents and his grandparents. no?

[Guest Pensions in Paradise]

Under 318 the daughter is attributed the stock owned by the parents, so she is an HCE. However, there is no double attribution to the daughter's husband. So unless the daughter directly owns more than 5% (disregarding the attributed stock), the husband is not an HCE.

[Lori H]

OK, thank you.

[wsp]

Family aggravation is gone. So unless the daughter owners more than 5% on her own, he is determined to be or not to be an HCE on his own merits.

One would think that the IRS would recognize that said son-in-law has taken the family aggravation load from the owner on the day that he said "I do" and thus should be rewarded with HCE status.

[Sully]

ok, now i'm even more confused. I'm aware family aggregation does not apply, what about family attribution? if the owner is the father, he is an hce as well as his wife, his children(in this case his daughter), his grandchildren, his parents and his grandparents. no?

I agree with all of those except the grandchildren. A grandparent's ownership is not attributed to a grandchild. However, a grandchild's ownership is attributed to a grandparent.

[Kirk Maldonado]

Here's something from Derrin's Q&A column here on BenefitsLink entitled Who's the Employer? that may be useful: http://benefitslink.com/modperl/qa.cgi?db=...oyer&id=113.

[BG5150]

Ownership attribution goes one up and two down: HCE's parents (1 up) and his/her children and grand children (2 down).

It also goes once laterally, that is HCE's spouse. No other spouses or relatives of the others.

(Try to picture a family tree, with generations going down).

[Sully]

Correct me if I am wrong, but I think the attribution goes 2 up and 1 down. Here's 318:

==============

Section 318. Constructive Ownership of Stock

(a) General rule

For purposes of those provisions of this subchapter to which the rules contained in this section are expressly made applicable--

(1) Members of family

(A) In general

An individual shall be considered as owning the stock owned, directly or indirectly, by or for--

(i) his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and

(ii) his children, grandchildren, and parents.

==============

Per the above, you are deemed to own the stock of your spouse, children, grandchildren and parents. No mention of grandparents.

[BG5150]

Think of the "up" and "down" as ages.

Thus, 1 up (your parents) and 2 down (your children and grandchildren).

[Sully]

Let's look at an example:

I own 100% of my corporation. Therefore, my spouse, my children, my parents and my grandparents are also treated as owning 100% of the corporation.

Agreed?

[BG5150]

I was looking at it from a different perspective. I was looking at if from the perspective of "whose stock do I own besides my own?" Rather than, "who also owns my stock?"

Sully you are right.

Please excuse my (previously) poorly worded posts.

What I meant was:

Say I don't own any stock myself. I am considered as owning, however, the stock of my parents, children and grand children. (1 up, two down)

Sorry for the confusion.