controlled group - parent/subsidiary

[k man]

when determining whether two entities are a parent/subsidiary controlled group do you apply attribution to the shareholders/members of the parent? in this case 10 of the members of one LLC each own 2.70% in that LLC and those same 10 own 10% each in another entity.

[ETA Consulting LLC]

Need more detail. You're only using up to 5 in the analysis, but the attribution rules do apply. Hence, if the 10 individuals are 10 couples (husband and wife), you'd basically end up with 5 owning those shares.

Good Luck!

[k man]

no family members involved. you shouldnt need more information. all unrelated individuals. my question regarding attribution is whether you attribute the ownership of the shares to the company. parent subsidiary rules only speak about the company owning percentages of another company, not the individual shareholders.

i believe that there is not a brother sister controlled group for that reason. i have already determined this is not a brother sister.

[MoShawn]

So I think what you are saying is:

Ten individuals own the other entity 100%. The 10 owners of the other entity own 27% of an LLC and the other entity owns the other 73%. Do you attribute that 27% to the other entity based on the fact that it is the same 10 individuals.

I would say no. The attribution rules that apply in a parent/sub circumstance are in regard to attribution from (1) options to purchase stock, (2) partnerships, and (3) estates or trusts. Absent one of these three circumstances, I would say you do not have a parent/sub controlled group.