Controlled Group Question

[metsfan026]

I have a quick question and just want to make sure I'm not overlooking anything:

Company 1
Person 1 - 100% ownership
Person 2 - 0% ownership (though they work for the company)

Company 2
Person 1 - 75% ownership
Person 2 - 25% ownership

The two people are not related.  Since Person 1 owns less than 80% of company 2, there isn't a Controlled Group issue (even though Person 2 works for both, they only have ownership in one).

Thanks in advance!

[Lou S.]

Correct; no GC based on those facts.

[EBECatty]

Don't forget to check the excluded stock rules, especially if person 2 is an employee of company 2 and person 1 has a non-reciprocal right such as a right of first refusal on person 2's stock. 

[C. B. Zeller]

There is a 415(h) controlled group.

EDIT: see below

[EBECatty]

8 minutes ago, C. B. Zeller said:

There is a 415(h) controlled group.

My understanding is that 415(h) applies only to parent-sub groups by reference to 1563(a)(1) (leaving out (a)(2), which covers brother-sister groups). Under 1563, I also don't think person 1's 75% ownership interest of company 2 will be attributed to company 1, so I don't think you have a 415(h) parent-sub group either. 

[C. B. Zeller]

2 hours ago, EBECatty said:

My understanding is that 415(h) applies only to parent-sub groups by reference to 1563(a)(1) (leaving out (a)(2), which covers brother-sister groups). Under 1563, I also don't think person 1's 75% ownership interest of company 2 will be attributed to company 1, so I don't think you have a 415(h) parent-sub group either. 

Upon second thought, I agree. In which case, I revise my prior comment to say that there may be a 415(h) controlled group. metsfan026 didn't specify what type of entities the companies are. If both companies are corporations then there is not a 415(h) controlled group. If Company 1  is a sole proprietorship, then the question becomes a little murkier as the sole proprietorship is equivalent to the individual for most purposes; is there any difference in saying that the individual owns 75% of company 2 vs the sole proprietorship owns 75% of company 2?