The Attribution Rules (Portfolio 554)

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Table of Contents

Detailed Analysis

I. Introduction

II. The Constructive Ownership Rules of § 267

III. Constructive Stock Ownership Rules of § 318

Introductory Material

A. Categories of Relationship in § 318

1. Attribution Between Family Members

2. Attribution Between a Partnership and Partners

a. Attribution from Partnership to Partners

b. Attribution from Partner to Partnership

c. S Corporation Treated as a Partnership

3. Attribution Between Estates and Beneficiaries

a. Attribution from Estate to Beneficiary

b. Attribution from Beneficiary to Estate

c. Planning to Prevent Attribution

4. Attribution Between Trust and Beneficiaries

a. Attribution from Trust to Beneficiary

b. Attribution from Beneficiary to Trust

c. Modifications

(1) Grantor Trust Rules

(2) Employees' Trust

5. Attribution Between Corporations and Shareholders

a. Attribution from Corporation to Shareholder

b. Attribution from Shareholder to Corporation

c. Attribution Between S Corporations and Shareholders

6. Options to Acquire Stock and to Acquire Options

a. Definition of an Option

b. Stock Option Rule

c. Option to Acquire Stock Option

d. Series of Options

e. Convertible Debentures

f. Restrictions on Options

g. Scope of Option Rules

h. Option Rule Supersedes Family Member Attribution Rule

7. Re-attribution

a. In General

b. Limitations on Re-attribution

(1) No Double Inclusion

(2) No Family Re-attribution

(3) No "Sidewise" Attribution

8. Direct or Indirect Ownership

B. Transactions to Which § 318 Applies

1. Section 302 - Distributions in Redemption of Stock

a. Substantially Disproportionate Distributions

b. Termination of Shareholder's Interest

(1) General Rule

(2) Special Rule Permitting Waiver of Family Attribution

(3) Waiver of Family Attribution and Redemption from an Entity: Prior Law

(4) Waiver of Family Attribution and Redemption from an Entity: Present Law

c. Redemptions Not Equivalent to a Dividend

2. Section 304 - Redemption Through Use of Related Corporations

a. Acquisitions by Related Corporations Other Than a Subsidiary Under § 304(a)(1)

b. Acquisition by a Subsidiary of Its Parent's Stock Under § 304(a)(2)

c. Control

d. Application of § 303 to a § 304 Transaction

e. Application of § 302 to a § 304 Transaction

3. Section 306 - Disposition of Preferred Stock

a. Complete Termination of Interest by Redemption

b. Complete Termination of Interest by Dispositions Other Than Redemptions

c. Definition of § 306 Stock

4. Section 338 - "Purchase" of Controlled Corporations

5. Section 382 - Special Limitations on Net Operating Loss Carryovers

a. Taxable Years Beginning Before 1987

b. Taxable Years Beginning After 1986

(1) Ownership Change

(a) Owner Shift Involving a 5% Shareholder

(b) Equity Structure Shift

(2) Attribution Rules

6. Section 856 - Real Estate Investment Trusts (REITs)

a. Amounts Received from a Person in Which a REIT Owns an Interest

b. Amounts Received from Persons to Whom a REIT Renders Services, Other Than Through Independent Contractors

7. Section 356(a)(2) - Boot Dividends in Reorganizations

8. Section 6038 - Information with Respect to Foreign Corporations and Partnerships

9. Transactions to Which § 318 Is Not Applicable

IV. The Personal Holding Company Rules (§ 544)

A. Situations in Which Attribution Rules Apply

B. Stock Held by a Corporation, Partnership, Estate, or Trust

1. In General

2. Constructive Ownership of Trust or Estate Assets

C. Constructive Ownership by Reason of Family or by Partnership

1. Family Attribution

2. Attribution Between Partners

D. Convertible Securities

1. In General

2. Securities Convertible at Different Times

E. Constructive Ownership by Reason of Options

1. In General

2. Period of Constructive Ownership

F. Attribution Rules Applied Only Against Taxpayer

G. Re-attribution

1. Situations in Which There Is Re-attribution

2. Situations in Which There Is No Re-attribution

a. Family or Partner Attribution

b. Convertible Securities

H. Option Rule in Lieu of Family and Partner Rule Where Both Are Applicable

V. The Foreign Personal Holding Company Rules (Former § 554)

A. In General

B. Statutory Attribution Scheme

1. Rule 1: Entity Attribution

a. Attribution from Corporations

b. Attribution from Partnerships

c. Attribution from Trusts

d. Attribution from Estates

2. Rule 2: Family and Partnership Attribution

a. Attribution from Family Members

b. Attribution from Partner

3. Rule 3: Option Ownership

4. Re-attribution of Constructively-Owned Stock

5. Overlapping Option Ownership and Family Attribution

6. Convertible Securities

VI. The Subpart F Rules (§ 958)

A. In General

B. Family Attribution

C. Partnerships and Estates

D. Trusts

E. Corporations

F. Options

G. Coordination of Attribution Rules

VII. The Passive Foreign Investment Company ("PFIC") (§ 1298)

A. In General

B. Corporations

C. Partnerships, Estates, or Trusts

D. Option Rule

E. Successive Application

VIII. The Controlled Group Rules (§ 1563)

Introductory Material

A. Attribution Through Options

B. Attribution from Partnerships

C. Attribution from Estates or Trusts

D. Attribution from Corporations

E. Attribution from Spouses

F. Attribution from Children, Grandchildren, Parents, and Grandparents

G. Operating Rules and Special Rules

1. Stock Owned by (Attributed to) Two or More Persons

2. Option Versus Other Forms of Constructive Ownership

Working Papers

Working Papers

Table of Worksheets

Worksheet 1 Section 267 Reference Chart (not Comprehensive)

Worksheet 2 Attribution Between Family Members Under § 318

Worksheet 3 Attribution Between Partnerships and Partners Under § 318

Worksheet 4 Attribution Between Estates and Beneficiaries Under § 318

Worksheet 5 Attribution Between Trusts and Beneficiaries Under § 318

Worksheet 6 Attribution Between Corporations and Shareholders Under § 318

Worksheet 7 Options to Acquire Stock and to Acquire Options Under § 318

Worksheet 8 Reattribution Under § 318

Worksheet 9 Comparison of Major Attribution Rules

Worksheet 10 Attribution Between Family Members

Worksheet 11 Attribution Between Partners and Partnerships

Worksheet 12 Attribution Between Estates and Beneficiaries

Worksheet 13 Attribution Between Trusts and Beneficiaries

Worksheet 14 Attribution Between Corporations and Shareholders

Worksheet 15 Attribution Between Corporations and Holders of Stock Options

Worksheet 16 Reattribution




Treasury Regulations:

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Treasury Rulings:



Legislative Information: