Controlled Group / Affiliated Service Group ?

[Below Ground]

Controlled Groups (CG) and especially Affiliated Service Groups (ASG), are not my forte. Any help with the following determination would be greatly appreciated.

Mother and Adult Son are in real estate together. Their firms are (1) each has an individual propreitorship, under which they are respectively paid. They also own an agency that is an S-Corp which they have both have a 50% ownership. This agency is where they do selling, and it employs real estate brokers that work for Mom/Son.

My first conclusion is that there is NO a CG. This is because neither Son or Mom have more than 50% ownership in the Agency, meaning no attribution of ownership. Without attribution, you don't have 80% common ownership, so no CG.

My question is primarily directed toward the ASG. I think that the Agency could qualify as a First Service Organization (FSO) as it does appear to satisfy the definition of service organization. I also think that the proprietorships could each be deemed to be A-Organizations, especially since commisions earned under the Agency are paid through the proprietorships.

Any help would be appreciated. Thanks!

[K2retire]

I am not an expert either, but I would come to the same conclusion you have.

[Below Ground]

Thanks K2. Ultimately, I will tell this "client" that I am not the person to call for this determination. However, before I tell someone that they need to spend money to get a proper opinion I would like to at least be "in the ball park". Again, thanks.

[Below Ground]

I did a search and found that I had asked basically the same question about 1 year ago. I totally forgot about that! Anyway, there was no "solution" then.

As I went through other relevant posting I found out the most likely reason replies on this topic are hard to come by. It seems that I am not alone with my confusion toward ASG determination. It's a hard topic!

[K2retire]

It seems that I am not alone with my confusion toward ASG determination. It's a hard topic!

I wish someone could get that idea into the collective consciousness of the management where I work!

[Jim Chad]

Another thing to look at is the management controlled group type of ASG. For this type of group under common control, there is no cross ownership needed. And I think you have one here.

To get a handle on this, I strongly....very strongly recommend Derrin Watson's book, "Who's The Employer"

I have the impression that no one is smart enough to look at a fact situation and decide that is not a group under common control. I know that I am not. Instead, I go through the chapter on each type and eliminate it or not, one type at a time.

The book also talks about statutory employees and statutory non-employees, including licensed real estate brokers.

[Below Ground]

Thanks to both.

[Guest Sieve]

Note that the management ASG (IRC Section 414(m)(5)) only applies if the "principal business" of the potential management organization is performing management functions. So, if the potential management organization has a principal business other than management, there would be no management ASG even if the supposed management organization performed all management functions necessary to the existence of the other entity.

[Below Ground]

Thanks. This seems to be getting very interesting!

[Guest Dressageho]

Note that the management ASG (IRC Section 414(m)(5)) only applies if the "principal business" of the potential management organization is performing management functions. So, if the potential management organization has a principal business other than management, there would be no management ASG even if the supposed management organization performed all management functions necessary to the existence of the other entity.

All of the statements made so far seem to be pretty accurate. However, another thing to note is that common ownership is not necessary if the "principal business" (as explained above) is the management of only one other company (or controlled group of companies). Because the mother and son's individual companies are not related, you may want to look into this further to ensure that even this exception does not apply to make the companies a controlled group.