Corporation A owns 60% of Corporation B. Individual X owns 40% of Corporation A. Does Individual X constructively own stock in Corporation B?

Answer options:

No, attribution stops at the corporation.

Yes, X is treated as owning 24% of B.

Yes, X is treated as owning 60% of B.

Yes, but only if X owns >50% of A.

How to approach this question

Multiply ownership percentages for entity-to-member attribution.

Full Answer

B.Yes, X is treated as owning 24% of B.✓ Correct

IRC §267(c). Stock owned by a corporation is treated as owned proportionately by its shareholders. X owns 40% of A, which owns 60% of B. X constructively owns 40% * 60% = 24% of B.

Common mistakes

Assuming no attribution or full attribution.

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