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

Featured Jobs

DC or DB Administrator

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

Farmer & Betts, Inc. logo

Retirement Plan Administrator

RSW & Associates
(CT / NJ / NY)

RSW & Associates 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

DB/DC Administrator

Primark Benefits
(Telecommute / Burlingame CA)

Primark Benefits logo

Retirement Plan Administrator (Account Manager)

Kushner & Company
(Telecommute / Portage MI)

Kushner & Company logo

DC Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

401(k) Consultant

TPS Group
(Telecommute / North Haven CT)

TPS Group logo

Retirement Plan Administrator

Bates & Company
(Telecommute / Winter Park FL)

Bates & Company logo

Employee Benefits/Health and Welfare Attorney

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

Miller Johnson logo

401(k) Implementation Manager

Human Interest
(Telecommute / San Francisco CA)

Human Interest 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)

Plan Document Specialist

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

Jocelyn Pension Consulting logo

Retirement Plan Consultant / Relationship Manager

Associated Pension Consultants
(Chico CA / Sacramento CA)

Associated Pension Consultants logo

Retirement Plan Administrator

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

My Benefits, LLC 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

Are Brothers and Sisters Related Parties?

(Posted April 16, 2001)

Question 94: Nursing Home Management Company manages 3 nursing homes as its sole business. Aaron owns one of the homes, Betty owns the second, and Charlie owns the third. Aaron is Betty's brother and Charlie is her half-brother. Are these businesses an affiliated service group under 414(m)(5)? All four businesses are incorporated.

Answer: Yes. A management function type of affiliated service group consists of a business that has the principal business purpose of managing 1 other business (or entities related to that business).

The question then is whether the three nursing homes are related. The definition of related parties for purposes of IRC 414(m)(5) is in IRC 267, which has its own set of attribution rules. Unlike the attribution rules under IRC 318 (which determine HCEs) and IRC 1563 (which determine controlled groups), under IRC 267 for related parties there is attribution between siblings and half siblings.

Accordingly, Betty is deemed to own, for purposes of IRC 267, all stock held by her brother and half-brother. So Betty is deemed to own all three nursing homes 100%. Not surprisingly, those three corporations all would be related parties.

Now Nursing Home Management has, as its sole business, the management of Betty's corporation and two other corporations that are each related to Betty's corporation. These four entities thus make a single management function group under IRC 414(m)(5). All employees of any of the four corporations are deemed to be employed by a single employer for a host of Internal Revenue Code purposes.

The related party rules are discussed in more detail in Chapter 17 of my book, Who's the Employer?. There also is a new appendix D in the second edition of my book, which compares the three sets of attribution rules and makes it much simpler to understand the differences between these systems.


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.