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Simple English definitions for legal terms
controlled corporate groups
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A quick definition of controlled corporate groups:
Controlled Corporate Groups: A group of two or more corporations whose stocks are mostly owned by five or fewer people. These groups are subject to special tax rules under the Internal Revenue Code, and are also known as controlled corporate groups.
A more thorough explanation:
Controlled corporate groups refer to two or more corporations whose stock is mostly owned by five or fewer individuals. These entities are subject to special tax rules under the Internal Revenue Code, which includes parent-subsidiary or brother-sister groups.
- Company A owns 60% of the stock of Company B, and the remaining 40% is owned by three individuals. This is a controlled corporate group.
- Company X and Company Y are both owned by the same individual, and no other person owns more than 5% of either company's stock. This is also a controlled corporate group.
These examples illustrate how controlled corporate groups are formed when a small group of individuals own a significant portion of the stock in multiple corporations. The special tax rules for these groups aim to prevent tax evasion and ensure fair taxation.