Mr.Y owns 40 percent of R Corporation and 20 percent of the Y&T Partnership.Y&T owns 30 percent of R.Under the constructive ownership rules of § 318, Mr.Y is treated as owning 46 percent of R.

Question

Quizplus · Accepted Answer

According to the constructive ownership rules of § 318, when an individual owns more than 50% of a partnership or estate, they are considered to own their proportionate share of any entity owned by that partnership or estate. Therefore, since Y&T owns 30% of R and Mr. Y owns 20% of Y&T, he is considered to own 6% (20% of 30%) of R through the partnership. Adding that to his direct ownership of 40% of R, he is considered to own 46% (40% + 6%) of R under § 318.

MrY Owns 40 Percent of R Corporation and 20 Percent