Controlled Group - any options

[imchipbrown]

Have a client who owns 100% of a C Corp and 100% of an S Corp. One employee in the C, 90 ees in the S Corp, a restaurant.

Employee X, running the restaurant, gets 25% of profits through a handshake arrangement. Doesn't want stock because of capital gains?

I've found Code Section 1563(e)(1), pertaining to options.

If my guy gives this Employee X an option to buy 25% of the S Corp, I'm thinking I wouldn't have a controlled group.