No. Section 318 of the Internal Revenue Code ("IRC") establishes the
attribution rules for constructive ownership of stock for federal income tax
purposes. IRC sections 318(2) and 318(3) address the attribution rules for
partners and partnerships. Under IRC §318(2), stock owned, directly or
indirectly, by or for a partnership is considered as owned proportionately by
its partners. Conversely, under IRC §318(3), stock owned, directly or
indirectly, by or for a partner is considered as owned by the partnership.
However, under IRC §318(5)(c), a partnership that constructively owns a
partner's stock by application of the attribution rules as stated in IRC §318(3)
cannot use the attribution provisions of IRC §318(2) to make another partner the
constructive owner of such stock. For example, if partner A owns 100% of the
stock in corporation C, and partner B owns 100% of the stock in corporation D,
the partners are not deemed to own each other's stock merely because partnership
AB is considered a constructive owner of all stock in both corporations by
attribution under IRC §318(3).
The Department makes use of the IRC §318 attribution rules to determine if a
group of persons meets the ownership or control tests necessary to form a
unitary business group under section 117 of the MBT act (MCL 208.1117). In the
example given above, corporations C and D and partnership AB could be part of
the same unitary group because more than 50% of the ownership interest in each
corporation is deemed to be owned or controlled by the same person, partnership
AB, through attribution under IRC §318. However, IRC §318(5)(d) would operate to
prevent corporations C and D from being considered brother-sister corporations
(because partners A and B are not deemed to own each others stock), and
therefore corporations C and D alone could not constitute a unitary business
group for MBT.
|
Printer Friendly
Text Version 
Email Page
