ExpertMedium1 markMultiple Choice
CPA · Question 66 · Area IV: Property Transactions
Corporation A owns 60% of Corporation B. Individual X owns 40% of Corporation A. Does Individual X constructively own stock in Corporation B?
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:
A.
No, attribution stops at the corporation.
B.
Yes, X is treated as owning 24% of B.
C.
Yes, X is treated as owning 60% of B.
D.
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
B
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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