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Ellen
Ellen, Attorney
Category: Business Law
Satisfied Customers: 36714
Experience:  25 years of experience helping people like you.
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I own a small business (an S corp.) I own 100% of the stock.

Customer Question

I own a small business (an S corp.) I own 100% of the stock. My son is an employee (not my dependant) and receives health benefits as do all the employees. I was told by my accountant that he must include the health benefit on his W2. I called the IRS they sited pg 15 of form 1120s and he does not have to list it because he does not own any stock. My accountant sited reg 318 and said he is 2% owner. He does not legally own any stock..   Does he have to list the health ins on his w2
Submitted: 8 years ago.
Category: Business Law
Expert:  Ellen replied 8 years ago.
Hello,

I agree with your accountant. Your son appears to be a constructive owner under 318.
Customer: replied 8 years ago.
further explain constructive owner. He has not purchased any stock in the company
Expert:  Ellen replied 8 years ago.
Hello,

Sec. 318. Constructive ownership of stock

(a) General rule
For purposes of those provisions of this subchapter to which the
rules contained in this section are expressly made applicable -
(1) Members of family
(A) In general
An individual shall be considered as owning the stock owned,
directly or indirectly, by or for
-
(i) his spouse (other than a spouse who is legally
separated from the individual under a decree of divorce or
separate maintenance), and
(ii) his children, grandchildren, and parents.

Customer: replied 8 years ago.
When does the constructive ownership of stock apply?
Expert:  Ellen replied 8 years ago.
It appears to apply when the child is employed in the business and the parent owns the stock.
Customer: replied 8 years ago.
So he wouldn' t be entitled to the same benefits as all the other employees.
Expert:  Ellen replied 8 years ago.
Hello,

I cannot determine what your son is entitled to as an employee. I can only give you information about the law.

Your question was "Does he have to list the health ins on his w2"
My answer is that your son appears to be a constructive owner under 318 and would therefor be required to list his health insurance on his W2.

I hope that this helps.
Ellen and 2 other Business Law Specialists are ready to help you
Customer: replied 8 years ago.
Thank-you. You have been a tremendous help. I would recommend your service to everyone.
Expert:  Ellen replied 8 years ago.
Thank you very much. I appreciate it.

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