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Question 85: X corp is a not-for-profit entity. X corp is the sole member and controlling entity of Y hospital. X corp also created several for-profit entities. Each for-profit entity issued all of its stock to a trust. X corp is the sole beneficiary of each trust. Are X corp, Y hospital and each of the for-profit entities a controlled group under Internal Revenue Code section 414? |
Answer: Let's start at the most basic level. We have a series of trusts, each of which has a single beneficiary, X, and each of which owns 100% of the stock of a corporation. X is deemed to own 100% of what each trust holds, because it is the sole beneficiary. Thus, after attribution, X is deemed to own 100% of the stock of each business. That's a classic parent-subsidiary controlled group. All of those businesses are treated as a single entity under Code section 414(b). |
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.
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