Qt: A owns 75% of his corp. B subsequently starts up and owns 100 % of her corp. They are legally divorced so no attribution flows to either and no controlled group exists.

However, since they have a minor child, that child is considered owning 75% of dad's corp and 100% of mom's corp. Am I correct in that there is now a controlled group because of the minor child?

Tx for any insight.

The resident expert on this topic is Derrin Watson. He has column of Q&A's here.

Controlled group rules use attribution under Code Section 1563. Under those rules for the child to be attributed ownership it would have to own more than 50% of the business. In this example the child owns 0% and is attributed nothing.

I think that I agree with Blinky's answer, but not necessarily the reason.

The reason Blinky gave -- the 50% rule of 1563(e)(6)(B) -- only applies to adult children.

The actual reason that they are not in a controlled group is that you don't do double attribution among family members.

1563(e)(6)(A) says "An individual shall be considered as owning stock owned, directly or indirectly, by or for his children who have not attained the age of 21 years, and, if the individual has not attained the age of 21 years, the stock owned, directly or indirectly, by or for his parents.

But Regulations Section 1.1563-3©(2) provides," Stock constructively owned by an individual by reason of the application of subparagraph (5) or (6) of paragraph (B) of this section shall not be treated as owned by him for purposes of again applying such subparagraphs in order to make another the constructive owner of such stock."

Minor! Alas my quick reading has caused my error.

Actually, there is not 80% ownership of A anyway.

I agree with Katherine on the 80% but not on the double attribution. You are only attributing once in each instance--Dad to kid, and Mom to kid. Kid is deemed to own 75% in one entity and 100% in the other. You might want to look at this link from Derrin Watson.


http://www.benefitslink.com/cgi-bin/qa.cgi...who_is_employer

Agree with KJohnson. By the way, I understand that Mr. Watson has accepted a position with Corbel. I certainly hope he continues to publish his "Who's the Employer" since this is my Bible for such questions! And it also reveals to me the extent of the complexity of such questions, which can turn 180 degrees on the TINIEST bit of information, which is why I always refer a client to their attorney.

Actually, Derrin Watson has already answered that question:
http://www.benefitslink.com/cgi-bin/qa.cgi...d=234&mode=read