Controlled Group - Husband and Wife

[Guest anth]

Husband owns 100% of Corp. A - Wife is not involved in this at all.

Corp A has solo 401K plan - husband is the only employee

Wife owns 51% and husband owns 49% of Corp. B

Wife manages Corp. B and is an employee of corp. B

B has safe harbor plan and has multiple employees

Do they come under controlled group?

Thanks

[QNPG]

Husband owns 100% of Corp. A - Wife is not involved in this at all.

Corp A has solo 401K plan - husband is the only employee

Wife owns 51% and husband owns 49% of Corp. B

Wife manages Corp. B and is an employee of corp. B

B has safe harbor plan and has multiple employees

Do they come under controlled group?

Thanks

[/quote

Due to the family attribution rules of IRC 1563, the wife and husband are deemed to own an interest in the business even though it is not directly owned by themselves but owned by the other. Yes, I would say it is a controlled group, and thus, Corp A's and Corp B's plan would need to be aggregated for all purposes (or exclude and pass). Not sure how it would work considering the other is a safe harbor plan and there are no nhces benefitting in Corp A's plan.

[Guest Sieve]

Querky's statement of attribution between spouses under IRC Section 1563 is a little overbroad (i.e., there are some circusmtances in which husband and wife ownership in a corp is not attributed to the other). Nevertheless, it is a correct conclusion that there is a controlled group relationship based on the facts you pose (since H is considered 100% owner of Corp B, and already is a 100% owner of Corp. A).

[QNPG]

Querky's statement of attribution between spouses under IRC Section 1563 is a little overbroad (i.e., there are some circusmtances in which husband and wife ownership in a corp is not attributed to the other). Nevertheless, it is a correct conclusion that there is a controlled group relationship based on the facts you pose (since H is considered 100% owner of Corp B, and already is a 100% owner of Corp. A).

Sieve, I didn't consider the exception since I thought the requirement that there be no direct ownership was violated. (husband owns 100% of one and certain % of the other) Am I missing something?

[Guest anth]

Querky's statement of attribution between spouses under IRC Section 1563 is a little overbroad (i.e., there are some circusmtances in which husband and wife ownership in a corp is not attributed to the other). Nevertheless, it is a correct conclusion that there is a controlled group relationship based on the facts you pose (since H is considered 100% owner of Corp B, and already is a 100% owner of Corp. A).

Sieve, I didn't consider the exception since I thought the requirement that there be no direct ownership was violated. (husband owns 100% of one and certain % of the other) Am I missing something?

Confused by the following example ..........by the attribution rule, all three corporations should be in controlled group but they say only M and P. What am I missing?

Thanks for your advice

Example (2). Individual H owns directly all the outstanding stock of corporation M. W (the wife of H) owns directly all the outstanding stock of corporation N. Neither spouse is considered as owning the stock directly owned by the other because each of the conditions prescribed in paragraph (b) (5)(ii) of this section is satisfied with respect to each corporation's 1970 taxable year. H owns directly 60 percent of the only class of stock of corporation P and W owns the remaining 40 percent of the P stock. Under subparagraph (2)(iii) of this paragraph, the stock of P is treated as owned only by H since H owns (directly and with the application of the rules contained in paragraph (b) (1), (2), (3), and (4) of this section) the stock possessing the greatest percentage of the total value of shares of all classes of stock of P. Accordingly, on December 31, 1970, P is treated as a component member of a brother-sister group consisting of M and P.

[GBurns]

In order to better understand the excerpted example, the context is needed. Where did you see this example?

[Guest Sieve]

Querky - You're not missing anything. I just wanted to make sure that you know it is not always the case that spouse ownership is attributed to the other in a potential controlled group situation (IRC Section 1563). But, your conclusion is correct for the reasons you state.

anth - N is not part of the controlled group because, as mentioned above, stock is not always attributed from one spouse to another in determining controlled groups. In this hypo, it is stated that there is no spouse attribution because all of the conditions of the exception are met. (See IRC Section 1563(e)(5), and the reg cited in your hypo: Treas. Reg. Sections 1.1563-3(b)(5)(ii) & 1.414©-4(b)(5)(ii).) Note that the controlled group attribution rules are different than those used to determine ownership for HCE & key employee, where there is direct attribution between spouses (except when legally separated) under IRC Section 318.