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Please see for reference this publication - http://www.irs.gov/pub/irs-tege/epchd704.pdf
See page 40An affiliated service group is one type of group of related employers and refers to two or more organizations that have a service relationship and, in some cases, an ownership relationship, described in IRC section 414(m). An affiliated service group can fall into one of three categories:
1. A-Organization groups (referred to as “A-Org”), consists of an organization designated as a First Service Organization (FSO) and at least one “A organization”,
2. B-Organization groups (referred to as “B-Org”), consists of a FSO and at least one “B organization”, or
3. Management groups.
See chart on page 45.
See page 4The controlled group definition is found in section 414(b) & (c). Section 414(b) covers controlled group consisting of corporations and defines a controlled group as a combination of two or more corporations that are under common control within the meaning of section 1563(a).
All employees of companies in the controlled group must be considered to determine if a plan maintained by a controlled group member meets the requirements of sections 401, 408(k), 408(p), 410, 411, 415, and 416.
Section 414(c) applies to controlled group of trades or businesses (whether or not incorporated), such as partnerships and proprietorships. Since section 1563 was written only for corporations, Treasury Regulations 1.414(c)-1 through 1.414(c)-5 mirror the section 1563 controlled group principles.
The definitions and examples used in this chapter refer to both section 414(b) and 414(c) controlled groups.
A control group relationship exists if the businesses have one of the following relationships:
− Brother-sister, and
− Combination of the above
For stock ownership for “controlled group” :
− Controlling interest - 1.414(c)-2(b)(2) – generally means 80 percent or more of the stock of each corporation (but only if such common owner own stock in each corporation); and
− Effective control – 1.414(c)-2(c)(2) – generally more than 50 percent of the stock of each corporation, but only to the extent such stock ownership is identical with respect to such corporation.
When calculating ownership interests, use the greater of:
− Corporate ownership – voting stock or value of stock
− Partnership ownership – capital or profits
For stock ownership for “affiliated group” - see page 64:The following table is a general description of how the attribution rules for organizations are applied to affiliated service groups (other than management organizations):
The ownership interests ----- Are attributed to:
From a corporation to itsshareholders ---- Corp ownership interests attributed, proportionately *, to shareholders (owning at least 50% of corp stock).
From a partnership to its partners ---- Partnership ownership interest attributed proportionately *, to all parties
From a trust to its beneficiaries ----- Trust’s ownership interests attributed proportionately *, to all beneficiaries.
To a corporation ---- Interest owned by individual owning at least 50% of corporation is
attributed to the corporation
To a partnership ----- Interest owned by partner is attributed to the partnership.
To a trust ----- Interest owned by trust beneficiaries is attributed to the trust
See also - http://www.law.cornell.edu/uscode/usc_sec_26_00001504----000-.html
For purposes of filing consolidated return:(2) 80-percent voting and value test
The ownership of stock of any corporation meets the requirements of this paragraph if it—
(A) possesses at least 80 percent of the total voting power of the stock of such corporation, and (B) has a value equal to at least 80 percent of the total value of the stock of such corporation.