Am I reading the code correctly in assuming a grandchild to an 100% owner is not an HCE? But if the situation was reversed(grandchild the owner) they would both be in the test? Thanks.

Under 318(a)(1)(A)(ii), a person is considering owning stock owned by his children, grandchildren and parents (but not by grandparents). I guess that they presume that the grandparent might exercise some control over the grandchild's interest, but the grandchild is unlikely to be exercising any control over the grandparent's interest, so ownership is not attributed?

Katherine,

I respectfully disagree.

I think they just like to make things more complicated than they need to be!

You're disagreeing with my explanation of the rationale for the rule -- but not with my statement of the rule, correct?

in my company we have a "catchy" littple phase for this to help remember the rules:

"One up, two down"

The way I was taught to remember it is that 1 logically follows 2 and that usually in conversation, you say "up & down" (not down & up). So 1,2, up, down. "one up, two down"

I hope this helps someone.

Katherine -

Just the why...

I agree with the rest of the statement!

Brian - thank's for the tip!

In my company we have a phrase also, "Sorry don't feed the bulldog!". It is unrelated to this post and I don't know exactly what it means, but I thought I would share it.