Controlled Group

[cpc0506]

Here is the scenario.

Company 1 is publicly traded.

Company 2 is owned 90% by Company 1.

Company 3 is owned 80% by Company 2.

What are the controlled groups here? I definitely see a Parent subsidiary CG with Company 1 and 2 and a Parent Subsidiary CG with Company 2 and Company 3.

But what about Company 1 and 3? If Company 3 is owned 80% by company 2, and Company 2 and Company 3 are a parent subidiary, does that make Company 1 and Company 3 a CG? Or does Company 1 own just 72% of Company 3 (90% x 80%) and therefore there is no controlled group?

What if Company 3 is only owned 60% by company 2? Does that change the CG situation?

Please provide guidance. Thanks.

[Guest Sieve]

All 3 are members of a controlled group under IRC Section 414(b). There is a parent-subsidiary controlled group because Co. 1 owns at least 80% of Co. 2 (IRC Section 1563(a)(1)(B)), and because Co. 2 owns at least 80% of Co. 3 (IRC Section 1563(a)(1)(A).

Co. 3 would not be part of the controlled group if Co. 2 owned less than 80% of Co. 3 (assuming that Co. 1 & 2 combined did not own at least 80% of Co. 3, and that there was no attribution that would cause Co. 2 to own at least 80% of Co. 3, and that none of the exclusions apply from IRC Section 1563©(2) that would cause the ownership of Co. 2 in Co. 3 to reach at lest 80%).

Co. 1 does not have to own at least 80% of EACH subsidiary, but only one of the subsidiaries (IRC Section 1563(a)(1)(A)).