Subscribe Now!
Free Daily News, Jobs, Webcasts, Discussions
Display and Distribute
Your Job Openings
COVID-19 News
COVID-19 Webcasts

Featured Jobs

Plan Consultant

Advanced Plan Designs, LLC
(Telecommute / Springfield MO)

Advanced Plan Designs, LLC logo

Administration Assistant

Southern Pension Services
(Tampa FL)

Southern Pension Services logo

DB/DC Plan Consultant

Small NY Actuarial TPA Firm
(Telecommute / CT / NJ / NY)

Manager/Supervisor of Benefits and Payroll Compensation

Virginia Farm Bureau
(Richmond VA)

Virginia Farm Bureau logo

Retirement Plan Administrator

Howard Simon & Associates
(Deerfield IL)

Howard Simon & Associates logo

Retirement Plan Administrator

Carpenter Morse Group
(Telecommute / Longwood FL)

Carpenter Morse Group logo

Legal Director

Pension Rights Center
(Telecommute / Washington DC)

Pension Rights Center logo

Administration Manager

Southern Pension Services
(Telecommute / Tampa FL)

Southern Pension Services logo

Retirement Plan Consultant

Definiti
(Telecommute / Dallas TX / University Place WA / The Woodlands TX)

Definiti logo

Plan Compliance Analyst (administrator)

RPA
(Telecommute / Falls Church VA)

RPA logo

Pension Plan Administrator

Quantech Pensions LLC
(Anaheim CA)

Retirement Plan Relationship Manager

Prosperity Advisors, LLC
(Akron OH)

Prosperity Advisors, LLC logo

Defined Contribution Plan Administrator

Pension Investors Corp of Orlando Inc
(Altamonte Springs FL)

Pension Investors Corp of Orlando Inc logo

Free Daily News and Jobs

“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

More on options

(Posted December 8, 1999)

Question 39: Your Q&As regarding options make an assumption that options to purchase stock directly from the corporation (i.e., the corporation issues stock if the option is exercised) are taken into account under attribution for controlled group purposes. Have you considered whether the exclusion of treasury stock (see IRC 1563(c)(1)(B)) mean that the shares subject to this type of option might not be counted? If you do believe such shares are counted, do you assume that all individuals would exercise their option in determining whether a controlled group relationship exists after option attribution is taken into account?

Answer: The attribution rules treat the holder of an option as though he were the owner of the underlying stock. So, suppose X Corporation gives Jill an option to buy 5000 shares of X stock. Jill is deemed to own those 5,000 shares. Now if Jill owns those 5,000 shares, the corporation doesn't, so under attribution they are not treasury stock. So, yes, those shares are counted.

The second question is a little more complex. The purpose of the attribution rules for controlled groups is to create groups that otherwise would not exist. In effect, you make whatever assumptions will create the group. Usually, that means you assume that simply the optionholder or optionholders in question will exercise their options.

For example, suppose X has two shareholders: Jack, with 6,000 shares and Jill with 4,000 shares. Jack owns 100% of another corporation and is unrelated to Jill (although they have been known to walk uphill together). Assume further that the corporation has given Jack an option to buy 10,000 shares and Jill an option to buy 8,000 shares. If Jack exercises his option, he will own 16,000 of the 20,000 shares, or 80%. Thus a controlled group would be created. (The way to get around the controlled group status in this case is to have Jill actually exercise all or part of her option, so Jack has less than 80%, even considering his option.)


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.