controlled group?

[pmacduff]

here's the data:

Company #1:

Individual A owns 51%

Individual B owns 49%

Company #2:

Company #1 owns 75%

Individual C owns 25%

Is this a controlled group?

I was charting this and looking at the brother-sister rules and do 5 or fewer own 80% or more, effective control, controlling interest and my head began spinning. I know this should be easy but seems like I overthink or something and end up confused.

Any help appreciated!

[mphs77]

Are Individuals A, B & C related to each other in any way?

[pmacduff]

no the individuals have no relationship to each other

(married, family, etc.)

[mphs77]

Since only people who own a portion of both Company 1 and 2 are considered for the 80% common ownership test, it would only Individuals A and B and their ownership are considered. Remember Individual C owns none of Company 1.

Thus as they own 100% of Company 1 and only 75% of Company 2, it would fail the 80% common ownership threshold and not be a controlled group.

[pmacduff]

ok - that's how I computed it as well and determined no controlled group.

nice to have reinforcement that my thought process was working, thank you!

[Mike Preston]

If there is a right of first refusal for C's stock that runs in favor of the other individuals or Company#1 and it is not part of a bonefide reciprocal arrangement as described in 1563 you might have to exclude C's shares. Check the bylaws of Company#2. Same thing might even apply to Company#1. Without knowing the specifics I don't think you have quite enough information. Suggest they punt to an ERISA attorney!