Who is Considered an “Owner”?

Family Attribution. Section 318: Constructive Ownership of Stock(a) General rule for purposes of those provisions of this subchapter to which the rules contained in this section are expressly made applicable– (1) Members of family (A) In general An individual shall be considered as owning the stock owned, directly or indirectly, by or for– (i) his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and (ii) his children, grandchildren, and parents. (B) Effect of adoption For purposes of subparagraph (A)(ii), a legally adopted child of an individual shall be treated as a child of such individual by blood. We can call this 2-up and 1-down. i.e. I own 100% of my corporation. Therefore, my spouse, my children, my parents and my grandparents are also treated as owning 100% of the corporation (but not my grandchildren).

(FAQ06RP)