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Brother-Sister Controlled Group [Internal Revenue Code]
Understanding Brother-Sister Controlled Group [Internal Revenue Code]: Key Insights
Definition & Meaning
A brother-sister controlled group refers to a situation involving two or more corporations that are significantly owned by a small number of individuals, estates, or trusts. Specifically, this group exists when five or fewer people collectively own more than fifty percent of the total voting power or total value of shares in each corporation. This definition is important for tax purposes, particularly in how corporations file consolidated returns under the Internal Revenue Code.
Table of content
Legal Use & context
The concept of a brother-sister controlled group is primarily used in tax law, particularly in relation to corporate taxation and the filing of consolidated returns. It is relevant for businesses that may need to consider their ownership structure when filing taxes or determining eligibility for certain tax benefits. Users can manage related forms and procedures using resources like US Legal Forms, which provide templates for tax filings and corporate structures.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: If two corporations, Corporation A and Corporation B, are each owned by three individuals who collectively own sixty percent of the voting power in both companies, they form a brother-sister controlled group.
Example 2: A family trust and two siblings each own shares in two different corporations, and together they hold over fifty percent of the shares in both. This scenario also qualifies as a brother-sister controlled group (hypothetical example).
Relevant laws & statutes
The primary statute governing brother-sister controlled groups is found in the Internal Revenue Code, specifically under 26 USCS § 1563. This section outlines the criteria for determining controlled groups for tax purposes.
Comparison with related terms
Term
Definition
Key Difference
Controlled Group
A group of corporations under common control.
Includes more than just brother-sister relationships; can involve parent-subsidiary structures.
Affiliated Group
A group of corporations that file consolidated tax returns.
Affiliated groups must have a parent corporation that owns at least eighty percent of the subsidiary corporations.
Common misunderstandings
What to do if this term applies to you
If you believe your corporations may qualify as a brother-sister controlled group, it is advisable to review your ownership structure carefully. Consider consulting with a tax professional to ensure compliance with tax regulations. You can also explore US Legal Forms for templates and resources to assist with your tax filings.
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Number of owners: Five or fewer individuals, estates, or trusts.
Relevant statute: 26 USCS § 1563.
Key takeaways
Frequently asked questions
It is a group of two or more corporations owned by five or fewer individuals, estates, or trusts who collectively hold more than fifty percent of the voting power or value of shares.
This classification affects how corporations file taxes and may influence eligibility for certain tax benefits.
Yes, both individuals and trusts can be included in the ownership calculation.