Who is the FSO?

[cpc0506]

Bob, Inc provides actuarial services for only two companies (TPA, LLC, and LOAN, LLC). Robert owns 100% of Bob, Inc, which in turn owns 5% of TPA, LLC (a Third party administrator) and 20% of LOAN, LLC (a loan processing company)

The remaining ownership of TPA, LLC and LOAN, LLC is owned by unrelated investors.

Which company(ies) satisfies the defintion of a First Service Organization? Which company(ies) satisfies the definition of an A-org?

[Guest Sieve]

Only Bob, Inc. can be an A-org, since a corporation cannot be an A-org unless it's a professional service corp. (Prop. Treas. Reg. Section 1.414(m)-1©.) Of course, Bob, Inc. may not fit all the requirements of an A-org desiognation--it's just that the other 2 entities cannot be A-orgs.

FWIW, absent the professional corp. rule mentioned above, I always do the analysis from all possible perspectives to see which definition each co. fits. That's the only way I can ever make sure that there is (or is not) an ASG relationship. More than one definition may apply, depending on the facts. I find that it does not pay to assume that an entity can only be an FSO or only be an A org or B org (but maybe that's because these rules are not as clear to me as they may be to others).

[taxllm]

What about a B organization? LOAN is a FSO and Bob, Inc. is a B-org. Treas. Reg. 1.414(m)-2©.

[cpc0506]

Only Bob, Inc. can be an A-org, since a corporation cannot be an A-org unless it's a professional service corp. (Prop. Treas. Reg. Section 1.414(m)-1©.) Of course, Bob, Inc. may not fit all the requirements of an A-org desiognation--it's just that the other 2 entities cannot be A-orgs.

FWIW, absent the professional corp. rule mentioned above, I always do the analysis from all possible perspectives to see which definition each co. fits. That's the only way I can ever make sure that there is (or is not) an ASG relationship. More than one definition may apply, depending on the facts. I find that it does not pay to assume that an entity can only be an FSO or only be an A org or B org (but maybe that's because these rules are not as clear to me as they may be to others).

If all the companies listed in my scenario were corporations, then there is any way/chance that I can have an ASG?

[Guest Sieve]

If all entities are corps., and none is a professional service corporation, then you cannot have an A org, but you could have a B org and still have an ASG.