Question

Tern Corporation has 2,000 shares of stock outstanding: Marina owns 700 shares, Russell owns 600 shares, Velvet Partnership owns 300 shares, and Yellow Corporation owns 400 shares. Marina and Russell, unrelated individuals, are equal partners of Velvet Partnership. Marina owns 25% of the stock in Yellow Corporation.

a. Applying the § 318 stock attribution rules, determine how many shares in Tern Corporation each shareholder owns, directly and indirectly:

Marina: Velvet Partnership:

Russell: Yellow Corporation:

b. Assume, instead, that Marina owns 75% of Yellow Corporation. How many shares does Marina own, directly and indirectly, in Tern Corporation?

Answer 1

Share attributable rule apply to stock held by corporation or partner only if shareholder own atleast 50% which means share held by corporation will be deemed to be owned by shareholder in the proportion to their holding if they hold more than 50% shares

A)

Marina owns: 850 shares

700 shares directly + 150 shares (indirectly from velet partnership 300×50% = 150 shares)

Russel owns : 750

600 shares directly + 150 shares (indirectly from velet partnership)

Velet partnership: 1600 shares

300 shares directly + 700 shares indirectly from marina + 600 shares indirectly from russel

Because stock owned by partner are fully deemed to be owned by partnership

Yellow corporation: 400 shares

There wi be no attribution to yellow corporation from marina as share held by her are less than 50%

.

B)

If marina holds 75% in yellow corporation their she owns : 1150

700 shares directly + 150 shares (indirectly from velet) + 300 shares (indirectly from yellow corporation 400 × 75% )

.

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