Controlled group and Affiliated Group Husband Wife

[Heather Lynn]

Husband Owns 51% of CORP A with >50 employees

Wife Owns 100% OF Corp B.-Solo 401k. Only Employee

Both have their own 401k plans.

CORP B does not derive any revenue from CORP A but they are in the same line of business(Consulting).

Are these two considered Controlled Group or Affiliated Service Group?

 

thanks

 

[C. B. Zeller]

There isn't a controlled group, since that requires 80% common control and you only have 51% common control, even assuming that that the spousal non-involvement exception doesn't apply. This is assuming that the other 49% of A is owned by an unrelated person.

ASG status is more fact-specific. Both corporations are in the field of consulting, which is one of the specified fields and automatically makes them service organizations. If we are considering an A-org group, then a corporation can only be the FSO if it is a professional service corporation. Are either of the corporations professional service corporations? Consultants are not on the list of professional services in the proposed regs, so they are probably not a professional service corporation. If not, then there can't be an A-org group since neither of them could be the FSO.

In order to be a B-org group, a significant portion of one of the corporations' business must be in providing services to the other corporation. If neither of them provide services to the other then there isn't a B-org group either.

It seems unlikely that there is an ASG, but as my signature line below says, this free advice is worth what you paid for it. If you want some advice you (or your client) can rely upon, get a lawyer.

[Heather Lynn]

Thank You!!