Family Attribution - Controlled Group

[dottie]

I am not an expert in the controlled group world and would appreciate any input on whether this scenario falls under a brother /sister controlled group

Company A - sole proprietor - Dave 100%

Company B - S-Corp  - Dave an employee - Dad owns 100%

Company C - Dave owns 15%, Dad owns 50% and various family members own 35%

None of the companies are related or have any business relations with each other.

As the family attribution rules apply, I am not sure if Company A & B would be considered a controlled group.

Thanks

 

[Luke Bailey]

I assume Dave is not a minor. On the limited info you've provided, A and B should not be a controlled group (because no one other than Dave owns equity in A and no one other than Dad owns equity in B, so there is no crossover ownership), but under 1563(e)(6)(A) and (B), depending on who the other family members are with the 35% in C other than Dad and Dave, B and C could be members of a controlled group, e.g. if the "various family members" who own 35% include spouse or minor child, because if does that would put Dad at 50+%, and once he has that he would attract Dave's 15%, so if attracted at least 15% from the 35% based, would get to 80%. Read 1563(e) a few times and you'll see.

[Larry Starr]

Dottie (and everyone else): if you are in this business, you NEED to have the indispensable bible regarding controlled groups and everything around that topic: Derrin Watson's "Who's The Employer". http://www.employerbook.com/

With this book, you ARE an expert!  Full Disclosure: Derrin is a partner of mine from years ago and I helped him with developing and marketing the book many years ago.  I am included in the dedication, but that should not detract from how fabulous this reference source is!!!! :-)

 

[Luke Bailey]

I agree Derrin's book is great. I didn't need it for the above question, but I have used it a lot. FYI, had Derrin gone into the clergy instead of law, I think he could actually have figured out how many angels there were dancing on the head of a pin.