Company Ownership

[Guest Phineas]

With regard to determining HCEs and key employees, does the type of share (voting share vs. non-voting share) make a difference? And in the same line of questioning, are shares held in irrevocable trusts treated the same as ones not in an irrevocable trust?

[PensionPro]

See 1.414(q)-1T Q&A8 and IRC 318(a)(2).

[Guest Phineas]

Thank you very much. It would appear, as far as a 5% owner is concerned, that both percentage of voting and overall percentage of ownership is relevant. Thanks, again.

[PensionPro]

Yes, ownership is based on the greater of the overall or voting stock percentage.

[Guest Sieve]

Remember, as per the regs, that it is voting interest or value, not voting interest or ownership percentage (which may be different from value).

Also, to answer your question on trust ownership, stock owned by a revocable (i.e., grantor) trust is treated as owned by the grantor (not by the beneficiaries), while stock in an irrevocable trust (e.g., after the death of the grantor) is treated as owned by the beneficiaries on an actuarial basis. (IRC Section 318(a)(2)(B) & Treas. Reg. Section 1.318-3.)

[Guest Phineas]

Thank you... all very helpful.