Control group Determination

[mlp0816]

Have a situation where I need to determine common ownership and if I need to include the employees of company "B" into the parent 401(k) Plan: Here is the layout.

Company A: John Smith owns 51%

Mary Smith (John's daughter) owns 19%

and the remaining 30% is owned by Mary's Trust

Company B: John Smith owns 51%

Mary Smith owns 1%

Bob Smith (John's son) owns 48%

is there a common ownership that we need to include the employees of company B into the the 401(k) set up for Company A?

[Guest A_Dude]

Yes, John Smith is attributed the ownership of Mary, and Bob because he owns more the 50% of each company (assuming they are not minors). It would also be the same if they are minors. This brings his attributed ownership above 80% in each company. I am also assuming that Mary has conrol of her Trust.

[J Simmons]

IRC sections 414(b) and ©, 1563(e)(3)(A) and (6)(B)

1563(e)(3)(A) attributes the 30% of stock owned by Mary's Trust to Mary, who thus owns 49%

Since John owns more than 50% of each company, he is deemed to own what his children, regardless of their ages, own. 1563(e)(6)(B).

Thus, John is considered the 100% owner of each company, and Companies A and B comprise a control group.

[mlp0816]

Thanks for the replies!