Organizations
Individuals | A | GHI | M | W | X | Y | Z |
A | 100% | 50% | 100% | 60% | 40% | 20% | 60% |
B | - | 40% | - | 15% | 40% | 50% | 30% |
C | - | - | - | - | 10% | 10% | 10% |
D | - | - | - | 25% | - | 20% | - |
E | - | 10% | - | - | 10% | - | - |
100% | 100% | 100% | 100% | 100% | 100% | 100% |
Under these facts the following four brother-sister groups of trades or businesses under common control exist: GHI, X and Z; X, Y and Z; W and Y; A and M. In the case of GHI, X, and Z, for example, A and B together have effective control of each organization because their combined identical ownership of GHI, X and Z is greater than 50%. (A's identical ownership of GHI, X and Z is 40% because A owns at least a 40% interest in each organization. B's identical ownership of GHI, X and Z is 30% because B owns at least a 30% interest in each organization.) A and B (the persons whose ownership is considered for purposes of the effective control requirement) together own a controlling interest in each organization because they own at least 80% of the capital interest of partnership GHI and at least 80% of the total combined voting power of corporations X and Z. Therefore, GHI, X and Z comprise a brother-sister group of trades or businesses under common control. Y is not a member of this group because neither the effective control requirement nor the 80% controlling interest requirement are met. (The effective control requirement is not met because A's and B's combined identical ownership in GHI, X, Y and Z (20% for A and 30% for B) does not exceed 50%. The 80% controlling interest test is not met because A and B together only own 70% of the total combined voting power of the stock of Y.) A and M are not members of this group because B owns no interest in either organization and A's ownership of GHI, X and Z, considered alone, is less than 80%.
Corporations
Individuals | U | V |
(percent) | (percent) | |
A | 12 | 12 |
B | 12 | 12 |
C | 12 | 12 |
D | 12 | 12 |
E | 13 | 13 |
F | 13 | 13 |
G | 13 | 13 |
H | 13 | 13 |
100 | 100 |
Any group of five of the shareholders will own more than 50 percent of the stock in each corporation, in identical holdings. However, U and V are not members of a brother-sister group of trades or businesses under common control because at least 80 percent of the stock of each corporation is not owned by the same five or fewer persons.
26 C.F.R. §1.414(c)-2