Controlled Group and Family Attribution

Jack and Jill are a married couple who both own 50% of company A.  Their adult son works for them and is considered a 100% shareholder through family attribution.

Son owns Company B 100%.  Company A and B have completely unrelated services and clients.  Are Company A and Company B a controlled group?  Or is this double attribution?

Thank you,

Tom

I don't think you have parent-child attribution at all, assuming you're working under section 1563 or 414. 

An adult child is only treated as owning the parent's stock in a corporation where the adult child already owns (either directly or through another form of attribution other than adult child/parent attribution) more than 50% of the corporation. Assuming the son could only be attributed the parents' stock through the adult child/parent attribution rules, the son does not own directly, and is not deemed to own indirectly, any of Corporation A.

The same rule would apply in reverse to determine the parents' ownership in Corporation B. If the only route to attribution is adult child/parent attribution, they are deemed to own 0% of Corporation B. 

So the ownership is: Corporation A, 100% parents; Corporation B, 100% son; no parent-child attribution; no overlapping ownership.

See Treasury Regulation 1.1563-3(b)(6)(ii) and the example in (iv), particularly subsection (d) of the example. The same rule and example are found in 1.414(c)-4(b)(6). 

On the other hand, if the son is working for the parents' company, there may be some other type of attribution, but I don't think parent-child will get you there on its own. 

None of parents' stockholding in company A is attributed to adult son. 

None of the adult son's stockholding in company B is attributed to the parents.