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Who's the Employer?
Answers are provided by S. Derrin Watson, JD, APMMultiple Family Attribution
| Question 242: S-Corp A is a consulting business owned 100% by wife. S-Corp B is a construction company owned as follows: Husband 55%, Husband's Dad 15%, Husband and Wife's 30 year old Son 10%, and two unrelated individuals 20%. Is this a controlled group? Suppose A is a legitimate consulting corporation but that typically 90% of its revenues result from services performed for B. Does that change your opinion? | |
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Answer: I can't be certain whether it's a controlled group because I'm not certain about attribution between Husband and Wife. Let's run through some things. (All references are to the third edition of Who's the Employer and are available online to subscribers to the web edition.)
Assuming all four of those conditions are met, then there is no attribution from my wife to me, or from Wife to Husband in your situation. Notice it does not really matter whether Husband's stock in B is attributed to Wife. Suppose it is; she would be deemed to own his 55% and her son's 10%, but there would be no attribution from Husband's Dad to Wife. That would be prohibited double family attribution. (Q 7:03.) Similarly, the presence of a child under age 21 would not affect things, because that child would not be deemed to own the stock held by his brother. (Q 7:19.) Would the source of revenues affect my answer? No. Controlled group status is based solely on ownership. Facts and circumstances issues, such as the type of business or the provision of services, are irrelevant. (Q 6:13.) |
Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.
The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.
Copyright 1999-2017 S. Derrin Watson
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