Question 207: Is there attribution between brothers and sisters for controlled group purposes? If so, perhaps the situation below is a controlled group.
Answer: No, there is never attribution between siblings for controlled group purposes. Here is the fact pattern involved:
|Owner||Corp X||Corp Y||Corp Z|
John and Joanne are brother and sister. Maria, James, and Frank are children of John. All persons named are over 20.
There are two key attribution rules applicable here:
Put those rules together, and there is no attribution between anybody you've listed on the facts you have given.
- There is never attribution based on family status between siblings under the controlled group rules. For that matter, there is no sibling attribution under the IRC 318 attribution rules for HCEs, key employees, and traditional affiliated service groups.
- A parent is deemed to own the stock of his or her adult (21 or older) children only if the parent already owns, or is deemed to own, more than half of the company.
Given that, it is clear that there is no controlled group. Y and Z do not have any overlapping owners. X and Z have overlapping owners, but they hold less than half of X, and so effective control cannot exist. X and Y have overlapping owners, but they own less than 80% of X and so a controlling interest cannot exist. So, the three companies are totally separate for retirement plan purposes.
The controlled group attribution rules are laid out in detail in Chapter 7 of my book, Who's the Employer.