Sun and Moon Corporations each have only one class of stock outstanding. Their stock ownership is shown below. Which of the four stock ownership changes that are illustrated is the minimum change that is needed if Sun and Moon Corporations are to be brother-sister corporations under the 50%-80% requirements? (Assume the two corporations are equally valued.)

Question

Sun and Moon Corporations each have only one class of stock outstanding. Their stock ownership is shown below.  Which of the four stock ownership changes that are illustrated is the minimum change that is needed if Sun and Moon Corporations are to be brother-sister corporations under the 50%-80% requirements? (Assume the two corporations are equally valued.)

Quizplus · Accepted Answer

For Sun and Moon Corporations to be brother-sister corporations under the 50%-80% requirements, one corporation must directly own 80% or more of the voting power of the other, or both corporations must be directly owned by a common parent corporation, with no one shareholder owning 80% or more of the voting power of either corporation. 
The minimum change needed in this case is for Charles to acquire an additional 10% of Moon Corporation so that Sun Corporation owns 80% of Moon Corporation's voting power (50% of 100% = 50% + 30% = 80%). This change is necessary because option C alone does not give Sun Corporation enough voting power in Moon Corporation to meet the 80% requirement, and option D alone gives Arthur too much voting power in Moon Corporation, thereby disqualifying Moon Corporation as a sister corporation.

Sun and Moon Corporations Each Have Only One Class of Stock