Subscribe Now!
Free Daily News, Jobs, Webcasts, Discussions
Post and Distribute
Your Jobs
ARPA News
ARPA Webcasts

Featured Jobs

Retirement Plan Administrator

RSW & Associates
(CT / NJ / NY)

RSW & Associates logo

Retirement Plan Administrator

My Benefits, LLC
(Telecommute / Daphne AL / Atlantic Beach FL)

My Benefits, LLC logo

Plan Document Specialist

Jocelyn Pension Consulting
(Telecommute / Boulder CO / San Rafael CA)

Jocelyn Pension Consulting logo

DB/DC Administrator

Primark Benefits
(Telecommute / Burlingame CA)

Primark Benefits logo

Retirement Plan Consultant / Relationship Manager

Associated Pension Consultants
(Chico CA / Sacramento CA)

Associated Pension Consultants logo

Director of 401(k) Implementation, Core

Human Interest
(Telecommute / Mill Valley CA)

Human Interest logo

DB Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

DC Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

DC or DB Administrator

Farmer & Betts, Inc.
(Telecommute / Tacoma WA / Tualatin OR / Littleton CO)

Farmer & Betts, Inc. logo

Retirement Plan Administrator (Account Manager)

Kushner & Company
(Telecommute / Portage MI)

Kushner & Company logo

Retirement Plan Administrator

Bates & Company
(Telecommute / Winter Park FL)

Bates & Company logo

Product Support Consultant

ftwilliam.com part of Wolters Kluwer Legal & Regulatory
(Telecommute)

ftwilliam.com part of Wolters Kluwer Legal & Regulatory logo

Director of Finance

NYCDC of Carpenters Benefit Funds
(New York NY)

401(k) Consultant

TPS Group
(Telecommute / North Haven CT)

TPS Group logo

401(k) Implementation Manager

Human Interest
(Telecommute / San Francisco CA)

Human Interest logo

Employee Benefits/Health and Welfare Attorney

Miller Johnson
(Telecommute / Grand Rapids MI / Kalamazoo MI / Detroit MI)

Miller Johnson logo

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Attribution Adds Owners, Not Shares

(Posted November 13, 2002)

Question 236: Wife owns 100% of Corporation A. She, her husband, and two unrelated individuals each own 25% of Corporation B. Is there any type of controlled group situation here, such as brother-sister? Do we assume the husband and wife together own an identical interest in both corporations of over 50%, because they each are considered to own the other spouse's interest in each corporation?

Answer: No, you are misunderstanding the attribution rules.

All of the attribution systems, under IRC sections 318, 1563 or 267 (with 1563 being the attrribution system that applies here) allow us to treat someone who doesn't own a particular share of stock as though he or she owned it. But none of them take that share of stock and treat it as though it were two shares.

Consider what this means for Corporation B. Suppose there are 100 shares of stock outstanding. Wife owns 25 shares outright. Husband owns 25 shares outright. Because of the attribution rules, we can treat Wife as owning 50 shares (and Husband 0), Husband as owning 50 shares (and Wife 0), Wife as owning 40 shares and Husband 10, or any other combination that adds up to 50. But the attribution rules don't take those 50 shares and turn them into 100 shares.

So the best we can do in trying to create a controlled group is to treat Wife as owning 100% of A and 50% of B. That's not nearly enough to create a controlled group. She'd need 30% more of B, or she'd need to have the unrelated individuals own part of A.

Let's look at this situation another way. Suppose you were right. Suppose that we treat Wife as owning 50 shares and Husband as owning 50 shares. There are still two other shareholders who each own 25 shares. Husband and Wife together still would have only 2/3 of Company B, which is not enough for a controlled group. So either way a controlled group does not exist. But I believe that such an analysis, where one adds stock rather than just adding stockholders, is flawed and inconsistent with the statute, regulations and case law.

I discuss the controlled group attribution rules with many examples in chapter 7 of my book, Who's the Employer.


Important notice:

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
Related links:

(restricted access)

(restricted access)

© 2021 BenefitsLink.com, Inc.