Question 335: Which of these companies are controlled groups? (Both children are over 20. There are no options, rights of first refusal, or other transfer restrictions.)
Corp. A is 50% owned by Dad, 25% by Son One, and 25% by son Two
Corp. B is 100% owned by son One
Corp. C is 50% owned by Dad and 50% by son One
Corp. D is 50% owned by Dad and 50% by son One (same as Corp. C)

Answer:
Corporations C and D are in a controlled group, because the ownership, held by fewer than 6 persons, is identical.
Corporations A and B are not part of the group. Under the controlled group attribution rules, there is no attribution from child to parent unless either:

The child is under age 21, or

The parent owns or otherwise is deemed to own more than half of the company.
Similarly, there is no attribution from parent to child unless either

The child is under age 21, or

The child owns, or otherwise is deemed to own more than half of the company.
Additionally, there is no attribution between siblings under the controlled group rules.
Applying those rules, there is no attribution in any of these companies. Corporation A is not part of the controlled group because son Two does not hold an interest in Corporations C or D, and so his interest in Corporation A is excluded under Vogel Fertilizer (see Q&A 224), and the 80% controlling interest test is not satisfied. Dad and son One hold only 75% of Corporation A.
Similarly, when looking at Corporation B, Vogel excludes Dad's stock in Corporations C and D. Son One on his own holds only 50% of Corporations C and D. Not only is that insufficient for a controlling interest, but it also fails to satisfy the more-than-50% effective control test.
It is important to note that the attribution rules we are discussing apply to controlled groups and groups of trades or businesses under common control. They do not apply to affiliated service groups, highly compensated employees, or key employees, where there is always attribution between parent and child, regardless of the ages.
For a full discussion of the controlled group attribution rules, please see Chapter 9 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.