318 family attribution from parent to three children

[Lawrence]

  Daycare ,solely owned by single parent through 100% ownership of Corp stock, has a 401k plan that allows for deferrals and profit sharing with immediate eligibility. Single Parent hires her three children, ages 23, 21, 19, who all immediately begin deferring salary.

Do the Section 318 stock attribution rules apply from the parent to all three children such that all three children are Key employees as well as the parent. OR can the parent's 100% ownership of the stock only be attributed to one child?

[PensionPro]

each child is deemed to own 100% of the corp

[Larry Starr]

16 hours ago, Lawrence said:

  Daycare ,solely owned by single parent through 100% ownership of Corp stock, has a 401k plan that allows for deferrals and profit sharing with immediate eligibility. Single Parent hires her three children, ages 23, 21, 19, who all immediately begin deferring salary.

Do the Section 318 stock attribution rules apply from the parent to all three children such that all three children are Key employees as well as the parent. OR can the parent's 100% ownership of the stock only be attributed to one child?

PensionPro gave you the correct answer.  You should consider purchasing the bible on controlled group issues, written by Derrin Watson who is a moderator on this board.  It is a mandatory resource for anyone in our business.  Here is the link: http://www.employerbook.com/

Full disclosure, while I receive no compensation, I am one of the people who worked with Derrin many years ago when he was one of my partners in the Pension Information Exchange on the early versions and helped develop marketing plans for those versions and am still listed in the forward with Derrin's thanks.

[Lawrence]

Larry:

I appreciate your suggestion of Derrick Watson's book.I have an older copy.

Unfortunately I was unable to determine the needed answer from the book examples and got hung up on re-attribution.

The 318 section of the book is also available online at  http://employerbook.hypermart.net/Reg318.htm

 

[Luke Bailey]

The statutory basis for PensionPro's and Larry Starr's correct answer is 318(a)(1)(A)(Ii). Compare to the more complicated rule of 1563(e)(6) that applies for controlled groups.

[Dave Baker]

We have quite a few Q&As that have been written by Derrin, which make for great reading -- https://benefitslink.com/cgi-bin/qa.cgi?db=qa_who_is_employer